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Basic Question 13 of 13
Your company purchased $10,000 worth of inventory on January 2nd on credit. The terms of the sale are 3/15 net 45. What is the effective annual interest rate if you pay the full amount in 45 days?
B. 37.6%
C. 44.9%
A. 28%
B. 37.6%
C. 44.9%
User Contributed Comments 5
| User | Comment |
|---|---|
| todolist | cost of trade credit = effective annual interest rate.... |
| troyboy | Why 365/30? I used 365/45 and got 28%?? Help please |
| Skrills | you get a 3 percent discount if you pay within 15 days(i.e. 3/15)... 45-15=30, days of interest |
| Gpcurve | This assumes daily compounding, which would be a quite unusual credit term. |
| jagp | Useful way of solving this on the texas BA II: PV = -9700 FV = 10000 N = 30/365 Compute for I/Y and it will give you the rate |
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Learning Outcome Statements
calculate and interpret annualized return measures and continuously compounded returns, and describe their appropriate uses
CFA® 2024 Level I Curriculum, Volume 1, Module 1.