What Happens to the Implied Interest Rate on Trade Credit

question 63

Multiple Choice

What happens to the implied interest rate on trade credit as the time interval between the discount period and payment period is decreased?

• A)The rate declines
• B)The rate increases
• C)The rate remains constant
• D)Impossible to predict without knowing length of discount period

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Definitions:

Slippery Slope Fallacy

A logical fallacy in which a relatively small first step leads to a chain of related events culminating in some significant effect, much like sliding down a slippery slope.

Gambler's Fallacy

A logical fallacy in which one assumes that future probabilities are altered by past events, often seen in gambling when assuming a certain outcome is "due".

Sunk Cost Fallacy

The misconception of valuing a project or investment based on the amount of resources already invested, rather than the prospective future returns.

Argumentum Ad Hominem

A logical fallacy that occurs when an argument is rebutted by attacking the character, motive, or other attribute of the person making the argument, rather than addressing the substance of the argument itself.