[Vania2000]

HELLO sir, this is from december 2016 CBE practice questions on the official platform.

the explanation is

If the discount is accepted, the company must pay $2,462.50 at the end of one month.

Alternatively, the company can effectively borrow the $2,462.50 for an additional two months at a cost of $37.50.

The two month rate of interest is therefore 37.50/2,462.5 x 100 = 1.5228%

The annual equivalent rate (AER) is therefore:

(1 + 0.015228)6 – 1 = 0.0949 or 9.49%

what I cant figure out is where the borrowing cost came from, maybe i’m missing something basic but no value of Borrowing cost is available in the question.

[Vania2000]

was i the only one who thought the team was lengthy? like my question #32 had analysis plus 3 requirements.

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