# The annual effective rate of interest for the calgon

• 8
• 100% (2) 2 out of 2 people found this document helpful

This preview shows page 6 - 8 out of 8 pages.

10.The annual effective rate of interest for the Calgon Corp. is 12%. If the cash managertypically invests freed-up funds in overnight investments or uses funds to pay down acredit line on which the company pays daily compounded interest, the appropriate dailyopportunity rate for short-term financial decisions would be:a.0.12/365b.(1+ 0.12) / 365c.[(1+ 0.12)1/365- 1] *d.(0.12)1/365Solution:Annual effective interest rate = [ (1 + annual interest rate/365)(365)] – 1= [ (1 + daily opportunity rate)(365)] – 1or, [ (1 + daily opportunity rate)(365)] = [1 + annual effective interest rate]or, [ (1 + daily opportunity rate)] = [(1 + annual effective interest rate)(1/365)]or, daily opportunity rate = [(1 + annual effective interest rate)(1/365)] – 1Thus, daily opportunity rate = [(1 + 0.12)(1/365)] – 1Ref: page 196
11.Traditional but flawed measures used to monitor receivables balances include each of thefollowing except:
Ref: pages 206, 209and 210Chapter 7:1.A ________________ source of financing provides funds automatically as a company'soperations expand.
Ref: page 2362Credit terms of 2/10, prox net 30 mean that a cash discount of 2% can be taken ifpayment is made by _________________ or the full invoice must be paid by__________________ .
Ref: page 2363The advantage of consignment to the retailer isa.not ever having to pay for the goodsb.not having to pay for the goods until the 30th day of the following monthc.not having to pay for the goods unless they are sold *d.a much larger price mark-up over cost than on items typically sold by theretailer
Ref: page 2374The most reliable measure of a firm's payment practices is
Ref: page 246

Course Hero member to access this document

End of preview. Want to read all 8 pages?