A firm offers terms of 2/15, net 40. What effective annual interest rate does the firm earn
Question:
A firm offers terms of 2/15, net 40. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculations, explain what will happen to this effective rate if:
a. The discount is changed to 3 percent.
b. The credit period is increased to 60 days.
c. The discount period is decreased to 20 days.
d. What is the EAR for each scenario?
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The interest rate for the term of the discount is Interes...View the full answer
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Related Book For 
Essentials Of Corporate Finance
ISBN: 9780073382463
7th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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