A Firm Buys on Terms of 3/15,net 45

question 70

Multiple Choice

A firm buys on terms of 3/15,net 45.It does not take the discount,and it generally pays after 60 days.What is the nominal annual percentage cost of its non-free trade credit,based on a 365-day year?

• A)25.09%
• B)27.59%
• C)30.35%
• D)33.39%
• E)36.73%

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Definitions:

Externalities

Financial repercussions impacting parties who are not directly involved, which may manifest as either beneficial or detrimental outcomes.

Sole Proprietorship

A business owned and operated by one person, where there is no legal distinction between the owner and the business entity.

High-Coupon Bonds

Bonds that offer interest rates significantly above the market average to attract investors despite potential risks.

Low-Coupon Bonds

Bonds that offer a lower interest rate compared to other bonds on the market.