3 Assume that the buyer borrowed enough cash to pay the bala

3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Use 365 days a year. Do not round intermediate calculations.) Savings from discount taken Interest Expense on Funds Borrowed Amount borrowed Number of days of interest Interest expense Buyer\'s net savings

Solution

Answer - As the actual figures are not given, the following figures are being assumed. Please replace these figures with actual figures. Calculation is being provided below

W/N-1 : Interest Expense -

For 365 days - Interest = 8%

For 50 days - ?

Thus, interest for 50 days = $23,280 * 8% *50/365 = $255

Savings from discount taken $720