A supplier has offered Royston Ltd. trade credit terms of 2/10, net 35. Royston Ltd. has an average accounts payable of $40. Its average daily cost of goods sold is $1.15.All figures are in millions. Use this new information to solve the following questions:

(a) How do you interpret the new terms of credit?(1 mark)

(b) Calculate the effective annual rate. How would you advise Royston after calculating its effective annual rate? Assume 365 days in a year, and the supplier sells the product for $100.(3 marks)

(c)Royston Ltd. is considering switching to a Japanese supplier next year, and wants to estimate how the exchange rate will affect its costs. The spot exchange rate for the Japanese Yen is 80 Yen/Dollar. The one-year interest rate in Australia is 2% and the one-year interest rate in Japan is 0%. Based on these rates, what is the implied one-year forward exchange rate if markets are internationally integrated?(2 marks)