A merchant buys a bill of goods requiring the payment of $1,500 at the end of 180 days. He is offered a 5% discount for cash in 30 days. What is the highest rate at which he could afford to borrow money in order to take advantage of the discount?

A merchant buys a bill of goods requiring the payment of $1,500 at the end of 180 days. He is offered a 5% discount for cash in 30 days. What is the highest rate at which he could afford to borrow money in order to take advantage of the discount?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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A merchant buys a bill of goods requiring the payment of $1,500 at the end of 180 days.
He is offered a 5% discount for cash in 30 days.
What is the highest rate at which he could afford to borrow money in order to take advantage of the discount?

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