Wright Mccoy
04/04/2023 · Primary School

ASK YOUR TEACHER \( \begin{array}{l}\text { A retailer owes a wholesaler } \$ 700,000 \text { due in } 45 \text { days. If the payment is } 15 \text { days late, there is a } 1 \% \text { penalty charge. The retailer } \\ \text { can get a 45-day certificate of deposit (CD) earning } 9 \% \text { per year simple interest or a } 60 \text {-day certificate earning } 10 \% \text { per year } \\ \text { simple interest. Is it better to take the } 45 \text {-day certificate and pay on time or to take the } 60 \text {-day certificate and pay late with the } \\ \text { penalty? } \\ \text { The 45-day certificate is better. } \\ \text { The } 60 \text {-day certificate is better. } \\ \text { They are equivalent. }\end{array} \) Need Help?

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The 45-day certificate with on-time payment is better than the 60-day certificate with late payment and a penalty.

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