SimpleSimon's Bakery purchases supplies on terms of 1.7 divided by 10 comma net 29

1.7/10,net29. If SimpleSimon's chooses to take the discountoffered, it must obtain a bank loan to meet itsshort-term financing needs. A local bank has quoted SimpleSimon's owner an interest rate of 11.5 %

11.5% on borrowed funds. Should SimpleSimon's enter the loan agreement with the bank and begin taking thediscount? (Use 365 days for ayear.)

a. SimpleSimon's can earn an effective rate of %. (Round to one decimalplace.)

b.

A.

SimpleSimon's will earn 39.0 %

39.0% on its purchases by paying within the discount period and should enter into the loan agreement.

B.

SimpleSimon's will earn 24.1 %

24.1% on its purchases by paying within the discount period and should enter into the loan agreement.

C.

The discount rate of 1.7 %

1.7% is considerably lower than the 11.5 %

11.5% interestrate, so SimpleSimon's should not enter into the loan agreement.

D.

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