Jim is in the market for a car that will last for the next 10 years and has saved up some money for the purpose of a car. What’s
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Answer:
Nominal Cost of Trade Credit = 25.09%
Exact Cost of Trade Credit = 28.03%
Explanation:
given data
buys worth = $1,000
terms = 3/15 n60
pays the bill = 60th day
to find out
Nominal Cost of Trade Credit and Exact Cost of Trade Credit
solution
we know here Discount % and time 60 day and discount period that is
Discount % = 3%
time for Payment = 60 days
and Discount Period = 15 days
so Nominal Cost of Trade Credit will be as
Nominal Cost of Trade Credit = Discount % ÷ (100 - Discount % ) × [ 365 ÷ (time for Payment - Discount Period) ] ..................1
put here value we get
Nominal Cost of Trade Credit = ×
Nominal Cost of Trade Credit = 25.09%
and
Exact Cost of Trade Credit will be here as
Exact Cost of Trade Credit = (1+Discount % ÷ (100%-Discount %))^(365/(time for Payment - Discount Period) - 1 ..................2
put here value we get
Exact Cost of Trade Credit =
Exact Cost of Trade Credit = 28.03%