Your Child's Orthodontist Offers You Two Alternative Payment Plans

question 4

Multiple Choice

Your child's orthodontist offers you two alternative payment plans.The first plan requires a $4,000 immediate up-front payment.The second plan requires you to make monthly payments of $137.41,payable at the end of each month for 3 years.What nominal annual interest rate is built into the monthly payment plan?

• A) 17.81%
• B) 14.50%
• C) 14.36%
• D) 13.50%
• E) 11.34%

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Definitions:

Direct Method

In cash flow reporting, a format that presents major classes of gross cash receipts and payments, providing transparency into a company's operating cash flows.

Operating Activities

Activities that constitute the primary or main activities of a business, such as selling goods or providing services.

Cash Collections

Cash collections involve the process of gathering all payments or receipts in cash form, typically from customers or clients.

Indirect Method

A method for preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.