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Trade Credit, implied annual yield, exchange rate

1. An Industry sells on terms of 3/10, net 30. Total sales for the year are $912,500. Forty percent of the customers pay on the 10th day and take discounts; the other 60% pay, on average, 40 days after their purchases.

a. What are the days sales outstanding?

b. What is the average amount of receivables?

c. What would happen to average receivables if McDowell toughened up on its collection policy with the result that all nondiscount customers paid on the 30th day?

2. Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume payment is made either on the due date or on the discount date.

a. 1/15, net 20
(All I need is one of these answered as I can create the others with your template)
b. 2/10, net 60
c. 3/10, net 45
d. 2/10. net 45
e. 2/15, net 40

3. A Treasury bond futures contract has a settlement price of 89-8. What is the implied annual yield?

4. Suppose that 1 Swiss franc could be purchased in the foreign exchange market for 60 U.S. cents today. If the franc appreciated 10% tomorrow against the dollar, how many francs would a dollar buy tomorrow?

Please provide me with the formulas in Excel or in a Word document.

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Solution Summary

Answers questions on Trade Credit, implied annual yield of Treasury bond futures, exchange rate.