As a company accounts payable manager, which of the following ...

[charchew]

As a company accounts payable manager, which of the following credit terms are most likely to
  entice you to take the cash discount?
 
  A) 2/10 net 60 B) 1/10 net 30 C) 1/10 net 45 D) 2/10 net 90

Question 2

) You pay 20 down on a home with a purchase price of 150,000. The bank will loan you the remaining balance at 6.84 APR. You have an option to make annual payments with a 20-year payment schedule.
 
  What is the annuity payment under the annual plan? Is this a better deal than an option to make a monthly plan of payments? Explain in terms of the effective cost of borrowing.
  What will be an ideal response?

[Pariscourtney]

Answer to Question 1

B

Answer to Question 2

Answer: The bank will loan you (1 - 0.2)  150,000 = 120,000, and this is the PV.
The PVIFA using r = 6.84 and n = 20 is 10.727045.
The annual annuity payment is: PMT = = = 11,186.68.
This is a better deal than monthly payments because whenever you have to make payments more frequently, your effective cost of borrowing goes up. For example, using the EAR formula with C/Y = 12 and monthly rate = = 0.5700, we get 7.0586. Since the EAR is the same as the APR for annual payments, the effective cost of borrowing for annual payments is 6.84, which is lower than 7.0586.