SOLUTION: I got 55.7% the first time and 45.4% the other way, please help: The effective annula cost of not taking advantage of the 3/10,net 30 terms offered by a supplier is? (Use a 360 da

Question 180602This question is from textbook Foundations of Finance
: I got 55.7% the first time and 45.4% the other way, please help:
The effective annula cost of not taking advantage of the 3/10,net 30 terms offered by a supplier is? (Use a 360 day year.)
This question is from textbook Foundations of Finance

Answer by Mathtut(3670) (Show Source): You can put this solution on YOUR website!
:
whats that statement about going with your first answer...lol
:
Discounted amount /(Discounted price/100) X 360/N =
Effective annual interest rate
:
where 360 = days in the fiscal year, and N = the number of days between the discount date and the final payment deadline.
:
(3/(97/100))*360/20=.0309278 *18=.5567(100)=55.67% or 55.7%
:
1/10 net 30 = 18.2%
1/10 net 45 = 10.4%
1/10 net 60 = 7.3%
2/10 net 30 = 36.7%
2/10 net 60 = 14.7%
2/20 net 90 = 10.5%
3/10 net 30 = 55.7%
3/10 net 60 = 22.3%
3/20 net 90 = 15.9%
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