Answer to Question #154425 in Financial Math for kris

Question #154425

A retailer received an invoice for the purchase of twenty rackets at RM140 each. He was given trade discounts of 15% and 5%. The cash discount terms on the invoice were 3/10, n/30. (a) Determine the single trade discount rate that is equivalent to the chain discounts. (b) Calculate the amount of payment if it is made one week after the date of invoice


1
Expert's answer
2021-01-12T12:19:55-0500

Answer:


Step 1;

  • Retailers and wholesalers want to know the one single discount rate that equates to a series of trade discounts. This is known as the single equivalent discount.
  • The single equivalent discount is a single trade discount that equates to all the discounts in a series or chain.
  • An explanation is given below in step 2 :


Step 2;

  • Equivalent Discount = "(A + B) - (A*B)\\over 100" where A = First Discount, B= First Discount.
  • First Discount= 15%
  •  First Discount= 5%
  • Equivalent Discount = "(15 + 5) - (15*5)\\over 100" =19.25%.
  • The discount rate will be 19.25%.

Calculation of the amount of payment if it is made one week after the date of the invoice

  •  Invoice for the purchase of twenty rackets at RM140 each.
  • Amount of payment after one week = RM140 -RM 140*3% =RM 135.80.

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