PROBLEM#1: TAKING AND GIVING UP CASH DISCOUNT

If a firm purchases raw materials from its supplier on a 2/10, net 40, cash discount basis, the equivalent annual interest
rate (using 360-day year) of foregoing the cash discount and making payment on the 40th day is

PROBLEM #2: COST OF BANK LOAN

ABC Trading Co. was granted a P200,000 bank loan with 12% stated interest.

Required: The effective annual rate under the following cases:

1. ABC receives the entire amount of P200,000.

2. ABC was granted a discounted loan.
3. ABC is required to maintain a compensating balance of P10,000 under the non-discounted loan.
4. ABC is required to maintain a compensating balance of 10% under a discounted loan.

PROBLEM#1: TAKING AND GIVING UP CASH DISCOUNT

If a firm purchases raw materials from its supplier on a 2/10, net 40, cash discount basis, the equivalent annual interest
rate (using 360-day year) of foregoing the cash discount and making payment on the 40th day is

PROBLEM #2: COST OF BANK LOAN

ABC Trading Co. was granted a P200,000 bank loan with 12% stated interest.

Required: The effective annual rate under the following cases:

1. ABC receives the entire amount of P200,000.

2. ABC was granted a discounted loan.
3. ABC is required to maintain a compensating balance of P10,000 under the non-discounted loan.
4. ABC is required to maintain a compensating balance of 10% under a discounted loan.

PROBLEM#1: TAKING AND GIVING UP CASH DISCOUNT

If a firm purchases raw materials from its supplier on a 2/10, net 40, cash discount basis, the equivalent annual interest
rate (using 360-day year) of foregoing the cash discount and making payment on the 40th day is

PROBLEM #2: COST OF BANK LOAN

ABC Trading Co. was granted a P200,000 bank loan with 12% stated interest.

Required: The effective annual rate under the following cases:

1. ABC receives the entire amount of P200,000.

2. ABC was granted a discounted loan.
3. ABC is required to maintain a compensating balance of P10,000 under the non-discounted loan.
4. ABC is required to maintain a compensating balance of 10% under a discounted loan.