{"id":194910,"date":"2025-02-25T09:19:41","date_gmt":"2025-02-25T09:19:41","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=194910"},"modified":"2025-02-25T09:19:44","modified_gmt":"2025-02-25T09:19:44","slug":"with-credit-terms-of-2-10-n-30-the-annual-interest-rate-for-paying-in-10-days-instead-of-30-days-is-closest-to","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/25\/with-credit-terms-of-2-10-n-30-the-annual-interest-rate-for-paying-in-10-days-instead-of-30-days-is-closest-to\/","title":{"rendered":"With credit terms of 2\/10, n\/30, the annual interest rate for paying in 10 days instead of 30 days is closest to"},"content":{"rendered":"\n

With credit terms of 2\/10, n\/30, the annual interest rate for paying in 10 days instead of 30 days is closest to:<\/p>\n\n\n\n

A. 2%<\/p>\n\n\n\n

B. 24%<\/p>\n\n\n\n

C. 30%<\/p>\n\n\n\n

D. 36%<\/p>\n\n\n\n

The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer: D. 36%<\/strong><\/h3>\n\n\n\n

Explanation:<\/h4>\n\n\n\n

The credit terms 2\/10, n\/30<\/strong> mean that the buyer receives a 2% discount<\/strong> if payment is made within 10 days<\/strong>; otherwise, the full invoice amount is due in 30 days<\/strong>. To determine the annual interest rate<\/strong> implied by delaying payment beyond the discount period, we use the effective interest rate formula<\/strong>: \\text{Effective Rate} = \\left( \\frac{\\text{Discount %}}{100\\% – \\text{Discount %}} \\right) \\times \\frac{365}{\\text{Extra Days of Credit}}<\/p>\n\n\n\n

Step-by-step calculation:<\/h3>\n\n\n\n
    \n
  1. Discount Offered:<\/strong>2%<\/strong>\n
      \n
    • This means that the buyer can either pay 98% of the invoice<\/strong> within 10 days<\/strong> or 100%<\/strong> at 30 days<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
    • Opportunity Cost:<\/strong>\n
        \n
      • If the buyer forgoes the discount<\/strong>, they are essentially borrowing<\/strong> the remaining 2% of the invoice for an additional 20 days<\/strong> (30 – 10).<\/li>\n<\/ul>\n<\/li>\n\n\n\n
      • Formula Application:<\/strong> Effective\u00a0Rate=(298)\u00d736520\\text{Effective Rate} = \\left( \\frac{2}{98} \\right) \\times \\frac{365}{20}<\/li>\n\n\n\n
      • Solving for Effective Annual Interest Rate:<\/strong> (298)=0.02041\\left( \\frac{2}{98} \\right) = 0.02041 0.02041\u00d736520=0.37270.02041 \\times \\frac{365}{20} = 0.3727 0.3727\u00d7100=37.27%0.3727 \\times 100 = 37.27\\%<\/li>\n<\/ol>\n\n\n\n

        Conclusion:<\/h3>\n\n\n\n

        The annual interest rate for delaying payment beyond the 10-day discount period is approximately 36%<\/strong>, making the correct answer D. 36%<\/strong>.<\/p>\n\n\n\n

        Now, I\u2019ll generate an image representing this concept.<\/p>\n\n\n\n

        \"\"<\/figure>\n\n\n\n

        I’ve generated an infographic illustrating the concept of trade credit terms “2\/10, n\/30”<\/strong> with a timeline and calculation details. Let me know if you need any modifications!<\/p>\n","protected":false},"excerpt":{"rendered":"

        With credit terms of 2\/10, n\/30, the annual interest rate for paying in 10 days instead of 30 days is closest to: A. 2% B. 24% C. 30% D. 36% The Correct Answer and Explanation is : Correct Answer: D. 36% Explanation: The credit terms 2\/10, n\/30 mean that the buyer receives a 2% discount […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-194910","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/194910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=194910"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/194910\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=194910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=194910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=194910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}