Question

What is the effective annual cost of skipping the discount and paying at the end of the net period for the following credit terms: 6/10, net 70

Answer 1

Answer:

APR = 38.829%

APY = 45.70%

Explanation:

Missing word "Calculate the APR and the APY."

Discount % = 6%

Total period = 70

Discount period = 10

i. APR = (Discount% / [100% - Discount%]) * (365 / [Total period - Discount period])

APR = [6% / 100%-6%] * [365 / 70 - 10]

APR = 6%/94% * 365/60

APR = 0.06382979 * 6.083333

APR = 0.38829787

APR = 38.83%

ii. APY = (1 + [Discount% / {100% - Discount%}])^(365/[Total period - Discount period]) - 1

APY = [1 + [6%/ / 100%-6%]^(365/70-10) - 1

APY = {1 + 0.06382979]^6.083333 - 1

APY = 1.06382979^6.083333 - 1

APY = 1.45704250704 - 1

APY = 0.45704250704

APY = 45.70%