Need your help… implicit cost of failing to take the discount (2/10) and paying in 45 days: Please explain where the 98 and the 35 comes from The answer: ((1 + 2/98)^365/35) - 1 Thanks! PS You guys are doing fantastic on tests! I am not even going to look at those treads. I seem to do nothing but bombing them this week. I am taking one sample today and one more mock test tomorrow and I am going to try as many questions in my trouble areas of FSA.
The discount is 2%, so you pay $98 instead of $100. The saving is for the rest 35 days (45-10).
s6309, that is a good explanation… think of it as a loan for 35 days, you will get $98, however have to repay $100… it is a discount security…so 2 / 98 would be the HPR and you are trying to find the EAY.