What effective annual interest rate does the firm earn when a customer does not
ID: 2643621 • Letter: W
Question
What effective annual interest rate does the firm earn when a customer does not take the discount?(Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
What effective annual interest rate does the firm earn if the discount is changed to 2 percent? (Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
What effective annual interest rate does the firm earn if the credit period is increased to 70 days? (Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
What effective annual interest rate does the firm earn if the discount period is increased to 30 days?(Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
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A firm offers terms of 1/25, net 50. (Enter your answers as directed, but do not round intermediate calculations.)Explanation / Answer
Effective Annual Interest Rate=[d/(1-d)]*[365/(n-p)]
1>Effective Annual Interest Rate: [0.01/(1-0.01)]*[365/(50-25)]=14.75%
2>Effective Annual Interest Rate :[0.02/(1-0.02)]*[365/(50-25)]=29.80%
3>Effective Annual Interest Rate : [0.01/(1-0.01)]*[365/(70-25)]=8.19%
4>Effective Annual Interest Rate : [0.01/(1-0.01)]*[365/(50-30)]=18.43%
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