Find the effective annual interest rate

Reference no: EM132156873

Question: The treasurer of a firm noted that many invoices were received with the following terms of payment: "2%- 10 days, net 30 days." Thus, if he were to pay the bill within 10 days of its date, he could deduct 2%. On the other hand, if he did not promptly pay the bill, the full amount would be due 30 days from the date of the invoice. Assuming a 20-day compounding period, the 2% deduction for prompt paymentis equivalent to what effective annual interest rate?

Reference no: EM132156873

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