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Question
Hyper Retail Outlets sell goods on terms of net 40. The store's average monthly sales (all on credit) are $70,000. Hyper pledges all of its receivables to the bank, which advances 80% of the face value of the receivables at a rate of 2.5% above prime. The bank also charges a 1% processing fee on all receivables pledged. Hyper borrows the full amount possible, and the current prime rate is 5%. What is the annual percentage rate (APR) of using this source of financing for one full year?A) 23.5%
B) 22.5%
C) 21.8%
D) 19.1%
Answer
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