Your Company Is Considering Granting Credit to a New Customer

Multiple Choice

Your company is considering granting credit to a new customer. The price per unit is $165 and the variable cost per unit is $150. The monthly interest rate is 0.8%. The customer will pay in 30 days if he does not default. If the customer does not default, he will buy one unit every month forever. What is the break-even default percent?

A) 3.7%
B) 8.0%
C) 61.5%
D) 88.0%
E) 92.0%