Use the following information to answer the following question(s).
Quick Corp.makes its purchases under terms of 2/10 net 30.
-If Quick Corp.foregoes the discount and pays for its purchases according to the terms of its trade credit,what is Quick's effective cost of using this source of credit?
A)26.67%
B)31.48%
C)36.73%
D)51.32%

Question

Quizplus · Accepted Answer

The effective cost of using this source of credit can be calculated as follows: 
Effective annual interest rate = [(Discount % ÷ (100% - Discount %)] x [(365 ÷ (Full credit period - Discount period))] 
= [(2% ÷ 98%)] x [(365 ÷ (30 - 10))] 
= 0.0204 x 18.25 
= 0.372% 
= 0.00372 
Therefore, Quick Corp's effective cost of using this source of credit is 0.372 x 100 = 36.73%.

Use the Following Information to Answer the Following Question(s)