Question

Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.

1/15, net 30. %

2/10, net 60. %

3/10, net 50. %

2/10, net 50. %

2/15, net 35.

Answer 1

Nominal cost of trade= (discount % / (1 – discount %))*(365/days past discount)

Nominal cost of trade credit=(0.01/(1-0.01))*(365/(30-15))

Nominal cost of trade credit = 24.58

Nominal cost of trade= (discount % / (1 – discount %))*(365/days past discount)

Nominal cost of trade credit=(0.02/(1-0.02))*(365/(60-10))

Nominal cost of trade credit = 14.9

Nominal cost of trade= (discount % / (1 – discount %))*(365/days past discount)

Nominal cost of trade credit=(0.03/(1-0.03))*(365/(50-10))

Nominal cost of trade credit = 28.22

Nominal cost of trade= (discount % / (1 – discount %))*(365/days past discount)

Nominal cost of trade credit=(0.02/(1-0.02))*(365/(50-10))

Nominal cost of trade credit = 18.62

Nominal cost of trade= (discount % / (1 – discount %))*(365/days past discount)

Nominal cost of trade credit=(0.02/(1-0.02))*(365/(35-15))

Nominal cost of trade credit = 37.24