If your firm buys $1,000 worth of supplies on credit with terms 3/15, n60, and pays the bill on the 60th day after the purchase: a. What is the approximate, or "nominal," cost of trade credit as an annual rate? b. What is the exact cost of trade credit as an annual rate?

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter16: Supply Chains And Working Capital Management
Section: Chapter Questions
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Provide a and b

If your firm buys $1,000 worth of supplies
on credit with terms 3/15, n60, and pays
the bill on the 60th day after the
purchase:
a. What is the approximate, or "nominal,"
cost of trade credit as an annual rate?
b. What is the exact cost of trade credit as
an annual rate?
Transcribed Image Text:If your firm buys $1,000 worth of supplies on credit with terms 3/15, n60, and pays the bill on the 60th day after the purchase: a. What is the approximate, or "nominal," cost of trade credit as an annual rate? b. What is the exact cost of trade credit as an annual rate?
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