Question

22. Mac Department Stores sell goods on terms of net 50. The store's average monthly sales (all on credit) are $30,000. Mac pledges all of its receivables to the bank, which advances 75% of the face value of the receivables at a rate of 1.5% above prime. The bank also charges a 1% processing fee on all receivables pledged. Mac borrows the full amount possible, and the current prime rate is 6%. What is the annual percentage rate (APR)of using this source of financing for one full year? a. 23.5% b. 19.6% c. 18.5% d. 14.1%

Answer 1