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Anastasy [175]
2 years ago
10

Rock bottom purchases its inventory on trade credit with terms of 2/10 net 45. If the firm waits the full 45 days to pay for the

inventory, what is the effective annual rate of interest is the firm paying for its trade credit
Business
1 answer:
Lera25 [3.4K]2 years ago
8 0

Answer:

The effective annual rate of interest is 23.45%

Explanation:

Effective annual rate of interest=(1+annual interest)^365/t-1

Annual interest =discount rate/100%-discount rate

discount rate here is 2%

annual interest=2/100-2

                         =2.04%

T is the difference between the discount period of 10 days and credit period of 45 days

45-10=35 days

Effective annual rate of interest=(1+2.04%)^(365/35)-1

                                                      =(1.0204^10.42857143) -1

                                                      = 1.2345  -1

                                                       =0.2345

                                                        =23.45%

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Suppose an investment project is projected to provide $198,000 in revenues if the project is undertaken. the investment will cos
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The price of gold is currently $1,400 per ounce. The forward price for delivery in one year is$1,500. An arbitrageur can borrow
Rashid [163]

Answer:

The arbitrageur should borrow money at 4% per annum since it is cheaper than paying the forward price for delivery

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Current price of gold=$1,400 per ounce

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Option 1

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Option 2

If the arbitrageur borrows the 1400 to pay for the gold now, then pay the interest in 1 year;

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NeTakaya

Answer:

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