A retailer offers two payment plans:

1. A 2% discount if paid within 10 calendar days after purchase
2. Pay the full amount on the 30th day after purchase

Assume a 365-day year.

The implied annual effective yield the buyer is charged for delaying payment from day 1 to day 30 is i.

Calculate i.

• 24.3%
• 26.8%
• 27.9%
• 36.5%
• 44.6%

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Solution: E

[[math]] \left(\frac{1}{0.98}\right)^{365/20} -1 = 44.6\% [[/math]]

• 24.3%
• 26.8%
• 27.9%
• 36.5%
• 44.6%

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.