Triumph Corporation extends credit to many of its customers, and sets the term o

Question

Triumph Corporation extends credit to many of its customers, and sets the term of these credits at: 1.15/7; net/26

Jones is a customer of Triumph and has received the above credit on a recent purchase of $100,000. Jones is trying decide whether to take Triumph up on its offer to pay early or instead to wait until the last possible day to pay the amount in full. Help Jones out by computing the annual interest rate implied by these credit terms.%

Place your answer as a percentage without any percent sign. That is, if you think the answer is twenty five point five percent, then place your answer as 25.5

Explanation / Answer

Annual interest rate = [Discount %/(100-discount %)]*[365/(full payment days-discount days)]

           = [1.15/(100-1.15)] *[365/(26-7)]

          = [1.15/98.85]*[365/19]

            = .011634*19.21053

           = .2235 or 22.35

**If 360 days are taken in a year ,then annual rate = [1.15/98.85]*[360/19]

            = .011634*18.94737

              = .2204 or 22.04

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