A firm offers terms of 1.4/10, net 60. What effective annual interest rate does

Question

A firm offers terms of 1.4/10, net 60.

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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What effective annual interest rate does the firm earn if the terms are changed to 2.4/10, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What effective annual interest rate does the firm earn if the terms are changed to 1.4/10, net 75, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What effective annual interest rate does the firm earn if the terms are changed to 1.4/15, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

A firm offers terms of 1.4/10, net 60.

Explanation / Answer

a)effective annual interest rate =(365/(60-10))*1.4%=10.22%

b)effective annual interest rate =(365/(60-10))*2.4%=17.52%

c)effective annual interest rate =(365/(75-10))*1.4%=7.86 %

d)effective annual interest rate =(365/(60-15))*1.4%=11.36%

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