BT321 A Homework: HW#11 Score: 0 of 1 pt P18-13 (similar to) 25of30(24 oorroete

Question

BT321 A Homework: HW#11 Score: 0 of 1 pt P18-13 (similar to) 25of30(24 oorroete Hw Score: 786796, 23.6 of 30 pm 0estion Help * (Related to Checkpoint 182) (Evaluating trade credit discounts) a tim buys on trade credit terms of 1/15, net 50 and dedioes to forgo the trade credit discount and pay on the net day, what is the annualined ost of foroing the dscourt (assume a 365-day year? Thermated cost of te tade credt terms of 1/15. net SOis%. (Round to two de ormal places ) Enter your answer in the answer box and then click Check Answer Clear All All parts showing

Explanation / Answer

Annualised cost of trade credit = [1+d÷(1-d)]^[365÷(Full payment days - Discount days)] -1

The annualised cost of the trade credit terms of 1/15, net 50 = [1+1%÷(1-1%)]^[365÷(50-15)] -1 = [1+1%÷99%]^[365÷35]-1 = [1+0.0101]^10.43-1 = 1.0101^10.43 -1 = 0.1105 = 11.05%

Annualised cost of trade credit = [1+d÷(1-d)]^[360÷(Full payment days - Discount days)] -1

The annualised cost of the trade credit terms of 4/10, net 20 = [1+4%÷(1-4%)]^[360÷(20-10)] -1 = [1+4%÷96%]^[360÷10] -1 = [1+0.0417]^36 -1 = 1.0417^36 -1 = 4.3525-1 = 3.3525 = 335.25%

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