You Point Out That the Nominal Cost of Not Taking

question 109

Multiple Choice

You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%. But since your firm is not taking discounts and is paying on Day 20, what is the effective annual cost (not the nominal cost) of your firm's current practice, using a 365-day year?

• A) 60.3%
• B) 63.5%
• C) 66.7%
• D) 70.0%

---

Definitions:

Imports

Goods or services bought from foreign countries for domestic consumption or use.

Free Trade

International trade left to its natural course without tariffs, quotas, or other restrictions.

Absolute Advantage

The ability of an individual, company, or country to produce a good or service at a lower cost per unit than the cost at which any other entity can produce the same good or service.

Comparative Advantage

The endowment of a person, enterprise, or nation to output a good or service at a diminished opportunity cost relative to rival entities.