Final answer:
Without specific details such as the discount for early payment, it's not possible to calculate the implied effective annual interest rate. Typically, details like nominal rates and payment incentives are needed to calculate the EAR for credit terms, which is critical for understanding the true cost of credit.
Step-by-step explanation:
To determine the implied effective annual interest rate when offering credit terms, you would need specific details about the discount percentage offered for early payment and the regular payment terms. The question does not provide enough specific information such as the discount offered for early payment and the normal rate to make an accurate calculation. However, the example states that you allow customers 90 days to pay their bills and offer an incentive for early payment while allowing payment for up to 180 days without mentioning any discount rates or additional fees for the extended payment period.
Typically, if a discount is offered for early payment it would be considered in calculations for the annual percentage rate (APR) or the effective annual rate (EAR) on the credit terms provided. The EAR includes the effects of compounding, which makes it a more accurate measure of interest charges over time than the nominal APR. To calculate the EAR, you could use the formula: EAR = (1 + i/n)^n - 1, where 'i' represents the nominal interest rate and 'n' the number of compounding periods per year.
Given comprehensive details, such calculations can be critical for businesses to understand the cost of credit terms offered to consumers and for buyers to understand the cost of taking credit over longer periods.