Under the credit policy followed by Cobb and Bonnieâs New Hampshire Ice Cream Company
QUESTION
Under the credit policy followed by Cobb and Bonnieâs New Hampshire Ice Cream Company, retailers that buy ice cream on credit are given 3 months to pay their bills. To offer these terms and carry the accompanying accounts receivable, Cobb and Bonnieâs has to borrow money from its bank. The bank charges a 13.8% annual percentage rate (APR) of interest, with monthly compounding. What APR should Cobb and Bonnieâs charge the retailers if their goal is to cover the costs of providing this financing?
ANSWER:
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