A Firm Offers Its Customers 2/14 Net 28

question 75

Multiple Choice

A firm offers its customers 2/14 net 28. What is the cost of trade credit to a customer who chooses to pay on day 28?

• A) 32.8%
• B) 67.3%
• C) 69.3%
• D) 72.4%

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Definitions:

Fractional Reserve Banking

A system in which depository institutions held reserves that are less than the amount of total deposits.

Actual Reserves

The amount of funds that a bank has on hand and in reserve accounts, which can be used to meet any withdrawal or payment demands.

Vault Cash

The physical currency a bank holds in its vault as part of its required reserves or for daily operations.

Monetary Policy

Central bank policies aimed at influencing economic activities through controlling interest rates and supply of money.