A Firm Buys on Terms of 3/15,net 45

question 110

Multiple Choice

A firm buys on terms of 3/15,net 45.It does not take the discount,and it generally pays after 110 days.What is the nominal annual percentage cost of its non-free trade credit,based on a 365-day year?

• A) 9.03%
• B) 13.78%
• C) 10.69%
• D) 11.88%
• E) 11.17%

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Definitions:

Domestic Output

The comprehensive total of all goods and services' value created inside a country's limits during a certain timeframe.

Average Tax Rate

The fraction of total income that is paid as taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.

Marginal Tax Rate

The tax rate that applies to the next dollar of taxable income, indicating the percentage of any additional earnings that will be paid in taxes.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount goes up, making higher earners pay a larger percentage of their income than lower earners.