Question No 16:
A company is considering offering its customers an early settlement discount. The company currently receives payments from customers on average 65 days after the invoice date. The company is considering offering a 2% early settlement discount for payment within 30 days of the invoice date.
The effective annual interest rate of the early settlement discount using compound interest methodology and assuming a 365 day year is:
A. 22.94%
B. 20.86%
C. 23.45%
D. 27.85%
Answer: C
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