You Are Offered Credit Terms of 1/20 Net 45

question 80

Multiple Choice

You are offered credit terms of 1/20 net 45.What is the implied rate of interest by the discount?

• A) 1.01%
• B) 12.12%
• C) 14.75%
• D) 25.25%

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Definitions:

Nominal Consideration

A minimal amount given in a contract that is not calculated by the actual value of the transaction but is symbolic, to make the agreement legally binding.

Moral Obligations

Ethical duties that a person feels compelled to perform based on personal beliefs about right and wrong, despite not being enforceable by law.

Illusory

Appearing to be real or possible, but actually being deceptive or unreal.

Adequate Consideration

Something of value exchanged between parties in a contract, which is fairly sufficient and corresponds to the terms and obligations agreed upon.