Orange Turtle Group buys on terms of 3.5/15, net 45 from its chief supplier. If Orange...

Orange Turtle Group buys on terms of 3.5/15, net 45 from its chief supplier.

If Orange Turtle receives an invoice for $1,545.78, what would be the true price of this invoice?

a. $1,491.68

b. $1,267.93

c. $1,118.76

d. $1,044.18

The nominal annual cost of the trade credit extended by the supplier is _____.

a. 43.29%

b. 36.66%

c. 39.75%

d. 44.17%

The effective annual rate of interest on trade credit is _______.

a. 63.72%

b. 44.82%

c. 54.00%

d. 55.08%

Suppose Orange Turtle does not take advantage of the discount and then chooses to pay its supplier late. On average, Orange Turtle will pay its supplier on the 50th day after the sale. As a result, Orange Turtle can decrease its nominal cost of trade credit by _____ by paying late.

a. 11.99

b. 7.26

c. 11.36

d. 6.31

Solutions

Expert Solution

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