# A retailer owes a wholesaler \$700,000 due in 45 days. If the payment is 15 days late, there is a 1% penalty charge. Since the bill isn't due immediately, the retailer can invest the \$700,000 in a...

A retailer owes a wholesaler \$700,000 due in 45 days. If the payment is 15 days late, there is a 1% penalty charge. Since the bill isn't due immediately, the retailer can invest the \$700,000 in a certificate of deposit and make money on the interest. The retailer has two options: a 45-day certificate of deposit (CD) earning 8% per year simple interest or a 60-day certificate earning 9% per year simple interest.

How much interest would the retailer earn? Use 360 days in a year. (Round your answers to the nearest cent.)

45-day certificate \$

60-day certificate \$

If the retailer opts for the 60-day certificate of deposit, he will be late on his payment to the wholesaler. How much will the penalty be if he is late on his payment to the wholesaler?

\$

How much will the retailer make in total if he opts for the 60-day certificate and has to pay the penalty out of the proceeds of the interest earned on the CD? (Round your answer to the nearest cent.)

\$

Is it better to take the 45-day certificate and pay on time or take the 60-day certificate and pay late with the penalty?

The 45-day certificate is better.

The 60-day certificate is better.

They are equivalent.

Jun 01, 2022
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