Asked by Kelsey Moses on Jul 07, 2024
Verified
A cash discount of 1/15,N/30 (1 percent cash discount if payment is made in 15 days,with the gross amount due in 30 days) is the equivalent of what approximate interest rate?
A) 24 percent.
B) 30 percent.
C) 36 percent.
D) 45 percent.
E) 54 percent.
Cash Discount
is a reduction in the invoice amount offered to purchasers as an incentive for early payment, improving cash flow.
Interest Rate
The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.
Gross Amount
The total sum before any deductions are made, such as taxes, discounts, or expenses.
- Acquire knowledge on the theory and mathematical analysis regarding cash discounts, emphasizing the shared benefits for consumers and merchants.
Verified Answer
CN
Chrissy NosarJul 11, 2024
Final Answer :
A
Explanation :
The discount is 1% for paying 15 days early, which is equivalent to an annual interest rate of (1% * 24) = 24%, since there are approximately 24 15-day periods in a year.
Learning Objectives
- Acquire knowledge on the theory and mathematical analysis regarding cash discounts, emphasizing the shared benefits for consumers and merchants.