A Company Purchased Goods on Credit with Credit Terms of 3/15

Multiple Choice

A company purchased goods on credit with credit terms of 3/15, n/45. Although the company does not have cash available to pay within the discount period, the manager of the company is considering borrowing money to take advantage of the discount. In order to make the appropriate decision, the manager computed the annual interest rate associated with the sales discount. What is the approximate annual rate?

A) 56%.
B) 18%.
C) 25%.
D) 38%.