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    Trade Credit Rates

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    Trade Credit Rates. A firm currently offers terms of sale of 3/20, net 40. What effect will the following actions have on the implicit interest rate charged to customers that pass up the cash discount? State whether the implicit interest rate will increase or decrease.
    a) The terms are changed to 4/20, net 40.
    b) The terms are changed to 3/30, net 40.
    c) The terms are changed to 3/20, net 30.

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    Solution Preview

    The attached file gives the calculation for the trade credit rates. The interest rate is calculated by using the Simple Interest ...

    Solution Summary

    The solution explains how to calculate the cost of trade credit given the trade terms