Finance unlimited is examining three possible funding methods for current assets. Details follow:

Stretch payables:

Supplier terms: 2/10 Net 30

Finance U. currently pays within the discount period

Finance U. is considering stretching 20 days to end of net period

Line of credit:

Loan Terms: 2.5% per month

A 3% compensating balance must be maintained by the bank

Factoring receivables:

Sell receivables to a factor at a 2.5% discount

Invoice terms are 1/20 Net 30

30% of customer take the discount

The remainder pay on day 35

By stretching payables and losing a discount, the firm is paying a finance charge of?

a. 2.04%

b.54%

c.54%

d.04%