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Problem 16-03 Cost of Trade Credit What are the nominal and effective costs of trade credit under the...

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Finance

Problem 16-03
Cost of Trade Credit

What are the nominal and effective costs of trade credit underthe credit terms of 1/20, net 40? Assume 365 days in a year foryour calculations. Round your answers to two decimal places. Do notround intermediate calculations.

Nominal cost of trade credit%
Effective cost of trade credit%

Problem 16-04
Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of2/15, net 40, but routinely takes 65 days to pay its bills.(Because the retailer is an important customer, suppliers allow thefirm to stretch its credit terms.) What is the retailer's effectivecost of trade credit? Assume 365 days in year for yourcalculations. Do not round intermediate calculations. Round youranswer to two decimal places.

%

Answer & Explanation Solved by verified expert
4.3 Ratings (554 Votes)
Ans a Under the credit terms of 120 net 40 and assuming 365 days in a year we have to calculate the Nominal cost of trade credit and effective cost of Trade credit Here 120 net 40    See Answer
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