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What effective annual interest rate does the firm earn

Question: 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 45 days.

c. The discount period is increased to 20 days.

d. What is the EAR for each scenario?

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Finance Basics: What effective annual interest rate does the firm earn

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