SOLUTION: A cash discount of 2% is given if a bill is paid 20 days in advance of its due date. At what interest rate could you afford to borrow money to take advantage of this discount?

Question 885995: A cash discount of 2% is given if a bill is paid 20 days in advance of its due date. At what interest rate could you afford to borrow money to take advantage of this discount?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
if you pay the bill 20 days in advance of the due date, you pay 100.
if you pay the bill less than 20 days before the due date, you pay 102.
let's say you borrow money at 1% so you can pay the bill 20 days before the due date.
you take that 100 and pay the bill early.
when the payment on the loan is due, you pay back 100 + 1 dollar for a total cost of 101.
you saved 1 dollar.
you will save money as long as the interest rate on the loan is less than the interest rate on the bill that is due.

RELATED QUESTIONS
a bicycle was purchased for $50 payable in 60 days or at a discount of 5% for cash. If... (answered by Edwin McCravy)

Burt’s Department Store needs $617,000 to take a cash discount of 2.50/10, net 90. A... (answered by Solver92311)

Please help me with the homework. 1. Ben owes 500 due in eight months. For each of the (answered by parmen)

Kindly requesting your help about homework. 1. Marry owes 500 due in eight months, for... (answered by ElectricPavlov)

Sam is getting ready for a big date when he realizes that he has no money. His roommate, (answered by greenestamps)

Please with the homework. A promissory note dated 1 April 2021 for 1500, borrowed at a (answered by parmen)

your hydro bill for march is $174.40. if you pay after the due date, a late payment... (answered by Fombitz)

3. As a professional photographer, Marion has seen the trend away from film cameras as... (answered by lplaud84)

While she was travelling, Zainab took advantage of the convenience of cash withdrawals on (answered by greenestamps,ikleyn)