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July 30th, 2019, 04:56 AM   #1
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Simple Interest Rate

John receives an invoice for USD 1000 with payment due within 30 days. The terms of payment allow for a discount of 2.5% if the bill is paid within 7 days. He borrows USD 975 to take advantage of the discount. What is the largest simple interest rate that John would be willing to pay the loan?
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July 30th, 2019, 10:36 AM   #2
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If the annual simple interest rate is 935.71%, the interest is \$975*9.3571/365 per day, which is \$24.99 after rounding, so John still benefits by \$0.01 by taking the loan on day 7 and repaying the loan the next day.
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July 30th, 2019, 11:32 PM   #3
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Is the idea that John is supposed to still end up paying \$1000? I didn't get that at all, lol, as I read it, 0% and I pay \$975 thankyou very much!

Last edited by greg1313; July 31st, 2019 at 12:34 AM.
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