A Firm Offers Terms of 2/5, Net 30

question 56

Multiple Choice

A firm offers terms of 2/5, net 30.What effective annual interest rate does the firm earn when a customer does not take the discount?

• A)21.69 percent
• B)24.42 percent
• C)28.97 percent
• D)31.08 percent
• E)34.31 percent

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Definitions:

Indirect Taxes

Taxes levied on goods and services rather than on income or profits, such as sales tax or VAT.

Federal Government

The federal government is the national government of a federal country, which holds the authority to govern the nation as a whole and is composed of several separate levels, including a central governing body and state or provincial governments.

Custom Duties

Taxes imposed on the import and export of goods between countries.

Procedural Due Process

Legal doctrine that requires the government to follow fair procedures before depriving a person of life, liberty, or property.