Question: Terms of Sale. A firm offers terms of 1/10, net 30. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculations, explain what will happen to this effective rate if:
a. The discount is changed to 2 percent.
b. The credit period is increased to 40 days.
c. The discount period is decreased to 20 days.
d. What is the EAR for each scenario?