Grayson Company purchased merchandise with an invoice price of $2,000 and credit terms of 3/10, n/30.Assuming a 360-day year, what is the implied annual interest rate inherent in the credit terms?
A)3%
B)8%
C)36%
D)54%

Question

Quizplus · Accepted Answer

The discount is 3% for paying within 10 days, which implies an interest rate for the remaining 20 days of the credit period. The annual interest rate is calculated as (3% / (30-10 days)) * (360 days / 20 days) = 54%.

Grayson Company Purchased Merchandise with an Invoice Price of $2,000