Under this method for figuring the interest rate on a loan, the borrower receives as proceeds of the loan the difference between the total amount owed and the interest bill. This method is reflected in which of the following rate measures?
A) Coupon rate
B) Yield to maturity
C) Current yield
D) Holding-period yield
E) Annual percentage rate (APR)
F) Simple interest rate
G) Add-on rate
H) Discount rate

Question

Quizplus · Accepted Answer

The add-on rate is the interest rate on a loan that is calculated by adding the interest to the principal and dividing the sum by the number of months in the loan term. This method is reflected in the annual percentage rate (APR), which is the total cost of a loan expressed as a yearly rate.

Under This Method for Figuring the Interest Rate on a Loan