A store will give a 2.5% disount on the cost of purchase if you pay cash today. The payment is due in 1 month. What is the implicit borrowing rate for clients that defer their payment for 1 month? The effective annual rate? Discouunt 0.015 Months 12 Quarterly Rate 0.00125 Effective Annual interest rate 19.56% 1+0.015^12-1=wrong. how do I calculate the effective annual rate correctly?

A store will give a 2.5% disount on the cost of purchase if you pay cash today. The payment is due in 1 month. What is the implicit borrowing rate for clients that defer their payment for 1 month? The effective annual rate? Discouunt 0.015 Months 12 Quarterly Rate 0.00125 Effective Annual interest rate 19.56% 1+0.015^12-1=wrong. how do I calculate the effective annual rate correctly?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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