What is effective quarterly interest rate charged by shady, Ask an Expert

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1) Suppose that Moonstar products inc has the agreement with shady finance company to factor its receivables. Shady charges the flat commission of 2% of receivables factored, plus 6% a year interest on outstanding balance. It also subtracts a reserve of 10% for returned and damaged materials. Interest and commission are paid in advance. No interest is charged on reserve or commission. If average level of outstanding receivables is= $700,000, and if they are turned over four times a year (therefore commission is paid four times a year), then what is effective quarterly interest rate charged by Shady for this arrangement?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M914522

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