I need to correct this problem, but I am confused as to how I correct it. This i

Question

I need to correct this problem, but I am confused as to how I correct it.

This is what I submitted as a solution.

I received this response from the professor:

"The interest rate is wrong. Remember, typically we state interest rates on per annum basis. So if I pay 1% interest per month on a loan, that is 12% interest per annum. To answer this question correctly you must look at the cost per month vs. the amount of debt outstanding per month, then multiply that by 12 to get the effective per annum interest rate."

How would I fix this? Thank you.

Explanation / Answer

Ans

Details Amount Cost of Factoring Service                   93,000.00 Amount Actually Received             14,07,000.00 Interest cost for 45 Days (Since Collection should have been made after a period of 45 Days) 6.61% Interest Cost PA 6.20%/45*365 53.61%

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