A Supplier Grants Credit Terms of 1/5, Net 30

question 80

Multiple Choice

A supplier grants credit terms of 1/5, net 30. What is the effective annual rate of the discount on a purchase of $5,000?

• A) 17.24 percent
• B) 15.80 percent
• C) 18.80 percent
• D) 19.03 percent
• E) 12.27 percent

---

Definitions:

Invoice Price

The price initially set by the manufacturer or provider for a product or service, usually before any discounts or increases for market forces.

Accrued Interest

Interest that has accumulated on a bond since the last interest payment was made but has not yet been paid to the bondholder.

Quote Sheet

A document or digital view listing the price quotes for various financial instruments or commodities, often used in trading.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the company's equity, usually at the discretion of the bondholder.