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    This posting discusses the effective cost of trade.

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    1) What is the nominal and effective cost of trade credit under the credit terms of 3/15 net 30?

    2) A large retailer obtains merchandise under the credit terms of 1/15 net 45, but routinely takes 60 days to pay its bills (because the retailer is an important customer, suppliers allow the firm to stretch its credit terms). What is the retailers effective cost of trade credit?

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    https://brainmass.com/business/international-trade/effective-cost-trade-credit-example-questions-463489

    Solution Preview

    1) What is the nominal and effective cost of trade credit under the credit terms of 3/15 net 30?

    Effective cost of trade credit:

    Effective cost of trade credit = (1.0309)24.33 - 1.0 = 1.0984 = 109.84%.

    Answer: ...

    Solution Summary

    The solution shows the calculations for determining the effective cost of trade under the terms of 3/15 net 30, and of 1/15 net 45.

    $2.19