Answer:
The implicit borrowing rate (EAR) being paid by customers who choose to defer payment for the month is 24.48%
Explanation:
In order to calculate the implicit borrowing rate we would have to calculate the following formula:
implicit borrowing rate=Discount%/(1-Discount%) *12/( payment months - discount month)
According to the given data we have the following:
Discount % =2
Payment days = 1 month
Therefore, implicit borrowing rate=2%/(1-2%)*12/1
implicit borrowing rate=(0.02/0.98)*12
implicit borrowing rate=24.48%
The implicit borrowing rate (EAR) being paid by customers who choose to defer payment for the month is 24.48%
