Answer:
The nominal annual percentage cost of its non-free trade credit, based on a 365-day year is 43.41%
Explanation:
Effective cost of trade credit
= (1 + Periodic rate)^Number of periods in a year - 1
= (1 + 0.025)^(365/25)-1
= 43.41%
Therefore, The nominal annual percentage cost of its non-free trade credit, based on a 365-day year is 43.41%
Answer: The answer is 37.4%
Explanation:
Using the formula Effective cost = i/1 -I × Days in the year/ CP - DP
Where CP = credit period which is the number of days required for full payment, DP = Discount period which is the maximum number of days allowed the customer to pay in order to enjoy cash discount, i = Discount rate per cent
I = 2.5, Days in the year = 365 days, CP = 40 , DP = 15
Rate = 2.5÷100 = 0.025
0.025/1 - 0.025 × 365/40 - 15
=0.025/0.975 × 365/25
= 9.125/24.375
= 0.374 × 100
= 37.4%
Therefore the nominal annual percentage cost is 37.4%
