Problem 16-03
Cost of Trade Credit
What are the nominal and effective costs of trade credit underthe credit terms of 1/20, net 40? Assume 365 days in a year foryour calculations. Round your answers to two decimal places. Do notround intermediate calculations.
| Nominal cost of trade credit | % |
| Effective cost of trade credit | % |
Problem 16-04
Cost of Trade Credit
A large retailer obtains merchandise under the credit terms of2/15, net 40, but routinely takes 65 days to pay its bills.(Because the retailer is an important customer, suppliers allow thefirm to stretch its credit terms.) What is the retailer's effectivecost of trade credit? Assume 365 days in year for yourcalculations. Do not round intermediate calculations. Round youranswer to two decimal places.
%
