A firm offers terms of 1/10, net 40.

a. What effective annual interest rate does the firm earn when a customer does not take the discount? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Effective annual interest rate             %

b. What effective annual interest rate does the firm earn if the discount is changed to 2 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Effective annual interest rate             %

c. What effective annual interest rate does the firm earn if the credit period is increased to 60 days? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Effective annual interest rate             %

d. What effective annual interest rate does the firm earn if the discount period is increased to 15 days? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Effective annual interest rate             %

References

eBook & Resources