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14 May, 04:03

A company is thinking of borrowing money at an 18% annual interest rate in order to pay a $30,000 invoice within the discount period. The invoice terms are 2/10, n/30. They should borrow the money because they will have a net savings of 19.2%. True or false?

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  1. 14 May, 04:40
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    True

    Explanation:

    The annual interest rate correlated with the credit conditions is 37.2 per cent and is determined by multiplying the 20-day rate of interest ($600 - $29,400) by the amount of 20-day periods over a year (365-20).

    18 per cent borrowing would save the company 19.2 per cent (37.2 per cent-18 per cent).
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