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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?

A. 28%
B. 37.6%
C. 44.9%
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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® 2025 Level I Curriculum, Volume 1, Module 1.