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GFOA CPFO Exam - Topic 12 Question 96 Discussion

Assume an invoice with credit terms of 2%/10, net30. The interest charge is 2% of $1000, or $20; the principal is $980; and the days of principal borrowed are the 20 days of credit. What is the interest rate offered if the discount is taken?
D) 37.35%
A) 37%
B) 37.23%
C) 37.33%

GFOA CPFO Exam - Topic 12 Question 96 Discussion

Actual exam question for GFOA's CPFO exam
Question #: 96
Topic #: 12
[All CPFO Questions]

Assume an invoice with credit terms of 2%/10, net30. The interest charge is 2% of $1000, or $20; the principal is $980; and the days of principal borrowed are the 20 days of credit. What is the interest rate offered if the discount is taken?

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Suggested Answer: D

by Beckie at Sep 12, 2024, 10:54 PM

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Dulce
8 months ago
Yep, definitely a high rate if you take the discount!
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Corinne
8 months ago
I think it's actually 37.33% if you do the math!
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Evangelina
9 months ago
Wait, how does that lead to 37%? Seems off.
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Lizette
9 months ago
Totally agree, that makes sense!
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Jeff
9 months ago
The interest charge is $20 on $980, right?
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Georgene
9 months ago
I feel like I should be able to calculate this, but I keep mixing up the discount percentage and the interest rate.
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Becky
9 months ago
I think the key is to find the annualized rate based on the 20 days, but I'm a bit confused about the principal amount used.
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Charlie
10 months ago
This question seems similar to the practice problems we did on credit terms, but I can't recall the exact formula for the interest rate.
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Selma
10 months ago
I remember we calculated effective interest rates in class, but I'm not sure how to apply it here with the discount.
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Jenelle
10 months ago
Okay, I think I can tackle this. The credit terms give us the discount rate and the number of days. We just need to figure out the effective annual interest rate based on that. I'll walk through it carefully and see if I can get the right answer.
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Karina
10 months ago
Ugh, I hate these finance problems. They always seem to have a lot of moving parts. I'm going to give it my best shot, but I'm not super confident about this one.
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Jospeh
10 months ago
Hmm, this looks tricky. I'm not sure I fully understand the credit terms and how to calculate the interest rate. I might need to review some examples of this type of problem before attempting it.
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Michael
10 months ago
Okay, let's think this through step-by-step. We have an invoice with credit terms of 2%/10, net30, and the interest charge is $20 on a principal of $980 over 20 days. We need to find the interest rate offered if the discount is taken.
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Bettina
10 months ago
I think I've got this. The key is to calculate the effective annual interest rate based on the 2% discount over 10 days. Let me work through the math and see if I can arrive at the correct answer.
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Aaron
10 months ago
The wording of the options is tricky, but I believe the correct answer is D. Spoke devices are limited to communicating with the hub, not directly with other spokes.
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Luis
10 months ago
I remember discussing different types of connections in virtual server setups, but I'm not sure if “primary physical connection” is right in this context.
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Elly
1 year ago
I bet the discount is the 'carrot' and the interest rate is the 'stick' in this question. Real 'carrot and stick' stuff, am I right?
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Candra
1 year ago
C) 37.33%
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Mila
1 year ago
B) 37.23%
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Hobert
1 year ago
A) 37%
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Leota
1 year ago
I bet the person who wrote this question is a math wizard. They really put us through the wringer with this one!
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Dustin
1 year ago
C) 37.33%
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Malcom
1 year ago
B) 37.23%
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Cecilia
1 year ago
A) 37%
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Lauran
1 year ago
37.35%? That's a pretty precise answer. I wonder if they're trying to trick us with that level of detail.
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Eura
1 year ago
I calculated it and got 37.35% too, so I think that's the correct answer.
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Berry
1 year ago
I agree, it seems like a tricky question to see if we understand the concept of interest rates.
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Lavera
1 year ago
I think they might be trying to test our calculation skills with that level of precision.
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Shawna
1 year ago
Hmm, I think I've got it. Option D looks like the right answer to me.
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Tasia
1 year ago
Yes, I think so too. Option D it is.
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Cyndy
1 year ago
I agree, option D seems to be the correct answer.
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Cordelia
1 year ago
I agree with Willie, the answer is C) 37.33% because the interest charge is $20 on a principal of $980.
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Rex
1 year ago
Wow, this is a tricky one! I'm going to need to break out my calculator for this one.
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Willie
1 year ago
I disagree, I calculated it and I believe the answer is C) 37.33%.
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Marti
1 year ago
I think the answer is A) 37%.
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