The Cash Discount Terms "2/10, Net 30" Mean That

question 135

Multiple Choice

The cash discount terms "2/10, net 30" mean that:

• A) the invoice is dated February 10 and must be paid by February 30.
• B) the buyer will, in effect, be borrowing at a 36 percent annual interest rate if he takes 30 days to pay the invoice.
• C) the buyer must make a 2 percent down payment-with the balance due in 10 to 30 days.
• D) a 2 percent discount off the face value of the invoice is permitted if the bill is paid within 30 days.
• E) None of these alternatives is correct.

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Definitions:

Option Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in case of a put option) the underlying asset.

Put Option Contracts

A financial instrument that gives the holder the right, but not the obligation, to sell a specified amount of an underlying security at a predetermined price within a specified time frame.

Exercise Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Option Price

The cost at which an option's holder has the right to purchase (for a call option) or sell (for a put option) the underlying asset or commodity.