A) 247.67 | B) 237.67 |

C) 227.67 | D) 215.67 |

Explanation:

Suppose the merchant will take advantage of the cash discount of 4% of $20 000 = $800 by paying the bill within 30 days from the date of invoice. He needs to borrow $20 000 = $800 = $19 200. He would borrow this money on day 30 and repay it on day 100 (the day the original invoice is due) resulting in a 70-day loan. The interest he should be willing to pay on borrowed money should not exceed the cash discount $800.

r=I/pt=21.73%

The highest simple interest rate at which the merchant can afford to borrow money is 21.73%. This is a break-even rate. If he can borrow money, say at a rate of 15%, he should do so. He would borrow $19 200 for 70 days at 15%. Maturity value of the loan is $19 200(1+0.15(70/365))=$19 752.33

savings would be $20 000 − $19 752.33 = $247.67

A) Rs.1,860 | B) Rs.1,800 |

C) Rs.1,980 | D) Rs.2,000 |

A) 40000, 20000 | B) 48000, 12000 |

C) 36000, 24000 | D) 32000, 28000 |