Response to the following questions:
1. Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume payment is made either on the due date or on the discount date.
a. 1/15, net 20.
b. 2/10, net 60.
c . 3/10, net 45.
d . 2/10, net 45.
e. 2/15, net 40.
2. a. If a firm buys under terms of 3/15, net 45, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit?
b. Does it receive more or less credit than it would if it paid within 15 days?