A firm offers terms of 1.8/10, net 30. a. What effective annual interest rate do

Question

A firm offers terms of 1.8/10, net 30.

a.

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 2.8/10, 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 1.8/10, net 60, 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 1.8/15, 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 1.8/10, net 30.

a.

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 2.8/10, 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 1.8/10, net 60, 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 1.8/15, 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))

Explanation / Answer

a. Effective annual interest = (100/(100-1.8))^(365/(30-10))-1 = 39.30%

b. Effective annual interest = (100/(100-2.8))^(365/(30-10))-1 = 67.92%

c. Effective annual interest = (100/(100-1.8))^(365/(60-10))-1 = 14.18%

d. Effective annual interest = (100/(100-1.8))^(365/(30-15))-1 = 55.58%

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

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