What Happens to the Implied Interest Rate on Trade Credit

question 90

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) It is impossible to predict without knowing the actual length of discount period.

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Definitions:

Area

The size or dimensions of a land area or surface.

z

Represents the standard score, indicating how many standard deviations an element is from the mean.

Standard Normal Random Variable

A normal distribution with a mean of 0 and a standard deviation of 1, used as a basis for comparison in statistics.

z

In statistics, often refers to a z-score, which measures the number of standard deviations a data point is from the mean of a distribution.