The following identifies the use of the $$ formula $(8-1)$ in calculating the cost of forgoing the discount.

On a $$100$ billing we could pay $$98$ up to the $10$ th day or $$100$ at the end of $30$ days. If we fail to take the cash discount, we get $q,$ Page $256$ to use $$98$ for $20$ more days for a $$2$ fee. The interest rate on the use of that money is then a whopping $37\mathrm{.}24$ percent. Note that we first consider the interest cost and then convert this to an annual. basis. The standard formula for approximating this interest cost is