Answer to Question #185241 in Financial Math for syed Kamran Ali

Question

book store purchased children’s books from the publisher in the amount of $1,550,000 with terms of 7/15, n/30, ROG. The goods arrived on November 12 and the invoice book store received is dated October 02. There is a late fee of 4%. How much discount can be availed if the book store decides to pay on November 17.  

Answer 1

Credit terms of 7/15, n/30 means that they will receive a discount of 7% only if they repay within the first 15 days and they will be allowed to repay within 30 days or be fined 4% for late payment.

Invoice date is October 2

Payment date is November 17

No of days in between is 46.

So, there is no discount that will be availed since payment took more than 7 days . It will only pay with interest of 4%,, that is:

$1,550,000\times1.04=1,612,000$