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

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

b. What is the effective annual rate of interest if Y pays on the due date rather than on day 30?

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c. How would you expect payment terms to change if i. The goods are perishable.

ii. The goods are not rapidly resold.

iii. The goods are sold to high-risk firms.

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