A firm offers terms of 1.6/10, net 30. What effective annual interest rate does

Question

A firm offers terms of 1.6/10, net 30.

What effective annual interest rate does the firm earn when a customer does not take the discount?(Use 365 days a year.Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What effective annual interest rate does the firm earn if the terms are changed to 2.6/10, net 30, and the customer does not take the discount?  (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What effective annual interest rate does the firm earn if the terms are changed to 1.6/10, net 45, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What effective annual interest rate does the firm earn if the terms are changed to 1.6/15, net 30, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

A firm offers terms of 1.6/10, net 30.

Explanation / Answer

a. Effective annual interest = (100/(100-1.6))^(365/(30-10))-1 = 34.23%

b. Effective annual interest = (100/(100-2.6))^(365/(30-10))-1 = 61.73%

c. Effective annual interest = (100/(100-1.6))^(365/(45-10))-1 = 18.32%

d. Effective annual interest = (100/(100-1.6))^(365/(30-15))-1 = 48.07%

Hope this helped ! Let me know in case of any queries.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.