Calculating Interest, payment date, etc from invoice terms

[Nikki111]

Did I get it?

[stapel]

A. What is the last date the payment can reach the dealer without being delinquent?

August 6

To my knowledge, you don't count the billing day, but days after the billing date. July 8th is one day after the billing date. July 18th is eleven days after. July 28th is twenty-one days after. So the 31st is the twenty-fourth day after. This gives you six more "safe" days, so August 6th is still okay.

B. What is the last date that you are eligible for the discount?

July 16th is the last date

As long as payment is made on or before the tenth day after the billing date, you can take the discount.

C. If the discount is taken, how much will be paid to the dealer?

.02x10,000=200
10000-200=9800

Yes.

D. If you go to the bank on day 10 to borrow the amount needed to pay the dealer at 8.5% interest, how much will you owe the bank? (principal and interest)

9800x8.5=833.00
833.00+9800=10,633
A=10,633

I think you forgot to include the term of the loan: twenty days, or 20/360 (or 20/365) of a year (depending on how your class is counting the length of a year).

Eliz.

[tkhunny]

...and a little notation problem.

You got 2% = 0.02, but seem to have missed that 8.5% = 0.085.