Problem:
Anne Lockwood, manager of Oaks Mall Jewelry, wants to sell on credit, giving customers 3 months to pay. However, Anne will have to borrow from her bank to carry the accounts receivable. The bank will charge a nominal rate of 15% and will compound monthly. Anne wants to quote a nominal rate to her customers (all of whom are expected to pay on time) that will exactly offset her financing costs.
Required:
Question: What nominal annual rate should she quote to her credit customers?
Note: Please provide reasons to support your answer.