For the year just ended, a firm had average accounts receivable of $90,000 and total credit sales of $700,000. Throughout the year, a factor purchased accounts receivable from the firm at a 1% discount. What was the firm's effective annual interest rate paid on its receivables financing? (Hint: interest is paid for the receivables period.. A. 8.1% B. 10.9% C. 11.9% D. 12.5% E. 9.2%

Why is the answer A?

1. For the year just ended, a firm had average accounts receivable of $90,000 and total credit sales of $700,000. Throughout the year, a factor purchased accounts receivable from the firm at a 1% discount. What was the firm's effective annual interest rate paid on its receivables financing? (Hint: interest is paid for the receivables period.. A. 8.1% B. 10.9% C. 11.9% D. 12.5% E. 9.2%