Your company has been offered a choice of two discounts because of a new policy change at a major supplier. Your company normally takes 60 days to pay for purchased goods. The discount choices are as follows:
Option 1: 3% discount if paid within 10 days
Option 2: 2% discount if paid within 20 days
Required:
(a) Calculate the approximate annualized interest rate if the discount is not taken.
(b) Calculate the exact compound annualized interest rate if the discount is not taken.
(c) Should your company take the discount? If so, which one should it take?