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Simple Annual Interest Rate of Discount question...

A company's terms of payment are 45 days. It is offering a 2% discount for payment within 7 days.

What is the simple annual interest rate of discount? Please show working, thanks.

Answers

  • Yalda20Yalda20 Registered Posts: 77
    Hi there,

    There is a formula to use for this:

    ((d/100-d)* (365/N-D))*100

    d=prompt payment discount percentage. N=normal settlement period in day. D=settlement period for early payment in days.

    d=2% N=45 days and D=7 days,

    100-2=98 45 days -7 days=38 days


    ((2/98)*(365/38))*100=19.60%

    Is this the answer? I hope this helps.













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