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Terms of Sale - Company X sells on a 1/30, net 60 basis. Customer Y buys goods invoiced at $1,000

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1. Company X sells on a 1/30, net 60 basis. Customer Y buys goods invoiced at $1,000.

- How much can Y deduct from the bill if Y pays on day 30?
- What is the effective annual rate of interest if Y pays on the due date rather than on day 30?
- How would you expect payment terms to change if

1. The goods are perishable.
2. The goods are not rapidly resold.
3. The goods are sold to high-risk firms.

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Solution Summary

This solution is comprised of a detailed explanation to answer the given problems related to both of the companies, including interest rates and payments.

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Terms of Sale

1. Company X sells on a 1/30, net 60 basis. Customer Y buys goods invoiced at $1,000.

- How much can Y deduct from the bill if Y pays on day 30?

If Y pays on day 30, Y will receive 1% discount.

$1,000 x 0.01 = $10

- What is the effective annual rate of interest if Y pays on the due date ...

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