What is the exact cost of trade credit as annual rate

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Reference no: EM131873467

1. Suppose your firm buys $1,000 worth of supplies on credit with terms 3/15 n60.

a. What does “3/15 n60” mean?

b. If you pay the bill on the 14th day after the purchase, what is the cost of the trade credit you have used for the 14-day period?

c. If you pay the bill on the 50th day after the purchase, what is the cost of the trade credit you have used for the 35-day period after the discount period ended?

2. 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?

Reference no: EM131873467

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