Which of the Following Changes to the Terms of Credit

question 35

Multiple Choice

Which of the following changes to the terms of credit would make the effective annual rate increase?

• A)Increase the cash discount percentage
• B)Extend the discount period
• C)Extend the payment period
• D)All of these changes will increase the effective rate

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Definitions:

Floating Rate

An interest rate that is allowed to move up and down with the rest of the market or along with an index.

Fixed Rate

Fixed rate refers to an interest rate that remains constant over the duration of a loan or deposit, not subject to change with market fluctuations.

Swap Contract

An agreement between two parties to exchange sequences of cash flows for a set period of time according to predetermined terms.

Forward Contract

An agreement customized for two individuals to either buy or sell a particular asset at a price decided upon for a future date.