Question 6

A firm buys on terms of 4/15, net 25. It does not take the discount, and it generally pays after 32 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? (State the answer as a percentage with the % symbol and round to 2 decimal places. For example, 0.13456 would be 13.456% and would be input as 13.46.)

Answer is 8.95%-Not correct

Nominal Percentage Cost = [Discount % / (100 - Discount %] * [365 / (Actual Days - Discount Days)] Nominal Percentage Cost = [4% / (100% - 4%)] * [365 / (32 - 15)] Nominal Percentage Cost = 0.0895 = 8.95%