What is the effective annual cost of credit terms of 3/15 net 30, if the firm stretches the accounts payable to 60 days?
A) 1.7%
B) 3.35%
C) 12.65%
D) 28.03%

Name: What is the effective annual cost of credit terms of 3/15 net 30, if the firm stretches the accounts payable to 60 days? A) 1.7% B) 3.35% C) 12.65% D) 28.03%
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Quizplus · Accepted Answer

D) 3 / 97 = 1.030928%; 60 days - 15 days = 45 days; Number of 45 days in a year = 365 / 45 = 8.11; Effective Annual cost = (1.030928)^8.11 - 1 = 28.03%

What Is the Effective Annual Cost of Credit Terms of 3/15