a-1.

A firm currently offers terms of sale of 3/10, net 50. Calculate the effective annual rate. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Effective annual rate %

a-2.

Calculate the effective annual rate if the terms are changed to 4/10, net 50. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Effective annual rate %

a-3.

What effect will part (a-2) have on the implicit interest rate charged to customers that pass up the cash discount?

Increase

Decrease

b-1.

Calculate the effective annual rate if the terms are changed to 3/20, net 50. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Effective annual rate %

b-2.

What effect will this have on the implicit interest rate charged to customers that pass up the cash discount?

Increase

Decrease

c-1.

Calculate the effective annual rate if the terms are changed to 3/10, net 40. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Effective annual rate %

c-2.

What effect will this have on the implicit interest rate charged to customers that pass up the cash discount?

Increase

Decrease

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