A firm offers its customers 2/14 net 28. What is the cost of trade credit to a customer who chooses to pay on day 28?
A) 32.8%
B) 67.3%
C) 69.3%
D) 72.4%

Question

Quizplus · Accepted Answer

C) Interest for 2 days = (2 / 98) + 1 = 0.020408 + 1 = 1.020408%; Number of 14 days period in a year = 365 / 14 = 26.0714; Effective annual rate or cost of trade credit = (1.020408)^26.0714 - 1 = 1.6934 - 1= 0.6934 or 69.3%

A Firm Offers Its Customers 2/14 Net 28