Calculating interest using the _____ will result in the highest annual percentage rate (APR) on a single-payment loan.
A) double-declining-balance method
B) discount method
C) average loan balance method
D) simple interest method
E) add-on method

Question

Calculating interest using the _____ will result in the highest annual percentage rate (APR) on a single-payment loan.
A) double-declining-balance method
B) discount method
C) average loan balance method
D) simple interest method
E) add-on method

Quizplus · Accepted Answer

The discount method results in the highest annual percentage rate (APR) on a single-payment loan because interest is deducted upfront from the amount borrowed, which results in a higher effective interest rate. The other methods mentioned, such as the double-declining-balance method, average loan balance method, simple interest method, and add-on method, do not take into account the time value of money in the same way that the discount method does.

Calculating Interest Using the _____ Will Result in the Highest Annual