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# Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes 50 days to pay its bills.

Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume 365 days in year for your calculations. Do not round intermediate calculations. Round your answer to two decimal places.

Accounts Payable

The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0.006. If interest rate parity holds, what is the 6-month forward exchange rate? Round the answer to five decimal places. Do not round intermediate calculations.

Purchasing Power Parity