Sue Cole is a new accountant withOrioleCompany.Oriolepurchased merchandise on account for $7,200. The credit terms are 1/10, n/30. Sue has talked with the company's banker and knows that she could earn6% on any money invested in the company's savings account.

(a) Should Sue pay the invoice within the discount period or should she keep the $7,200in the savings account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best.

(b) If Sue forgoes the discount, it may be viewed as paying an interest rate of4% for the use of $7,200for 20 days.

Calculate the annual rate of interest that this is equivalent to.