Question

A firm offers terms of 1.4/10, net 60.

  

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 enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	What effective annual interest rate does the firm earn if the terms are changed to 2.4/10, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c.	What effective annual interest rate does the firm earn if the terms are changed to 1.4/10, net 75, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
d.	What effective annual interest rate does the firm earn if the terms are changed to 1.4/15, net 60, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

   

a. Effective annual rate?_______%

b. Effective annual rate?_______%

c. Effective annual rate?_______%

d. Effective annual rate?_______%

Answer 1

a) 1.4/10, net 60

b) 2.4/10, net 60

c) 1.4/10, net 75

d) 1.4/15, net 60

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