Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little...
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Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little Store rides the credit and generally pays on the 45th day. Occasionally, payment is made as late as the 55th day. What is the approximate cost of the credit (using simple interest) in each case? What is the compound cost of credit in each case? Assume there are 365 days in a year. Round your answers to one decimal place. a. if paid on time Approximate interest rate: Compound interest rate: b. if paid on the 45th day Approximate interest rate: Compound interest rate: c. if paid on the 55th day Approximate interest rate: Compound interest rate: % % % % % % Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little Store rides the credit and generally pays on the 45th day. Occasionally, payment is made as late as the 55th day. What is the approximate cost of the credit (using simple interest) in each case? What is the compound cost of credit in each case? Assume there are 365 days in a year. Round your answers to one decimal place. a. if paid on time Approximate interest rate: Compound interest rate: b. if paid on the 45th day Approximate interest rate: Compound interest rate: c. if paid on the 55th day Approximate interest rate: Compound interest rate: % % % % % %
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Answer rating: 100% (QA)
Answer To calculate the approximate cost of credit we need to use the formula for simple interest Interest Principal x Rate x Time Where Principal is the amount borrowed the value of the inventory pur... View the full answer
Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
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