Question

XYZ corporation purchases $100 of merchandise from Mahan Corporation with terms of 2/10, net 30.If XYZ Corporation decides to pay the bill in 30 days, the effective annual rate would be _____

44.6%(1 + (2 / 98)) (365/20 ) – 1 = .4458 = 44.58%

Answer 1

The effective annual rate for XYZ Corporation if they decide to pay the bill in 30 days is approximately 44.58%.

Step-by-step explanation:

The effective annual rate for XYZ Corporation if they decide to pay the bill in 30 days can be calculated using the formula:

Effective Annual Rate = (1 + (2 / 98))(365/20) - 1

Substituting the values, the effective annual rate would be approximately 44.58%.

This means that if XYZ Corporation delays payment for 30 days, the annual interest they would effectively be paying on the $100 bill from Mahan Corporation is approximately 44.58%.