The rate of interest that actually is incurred on a note payable is called the:
A) Face rate.
B) Contract rate.
C) Effective rate.
D) Stated rate.

Question

Quizplus · Accepted Answer

The effective rate is the rate of interest that actually accrues on a note payable, taking into account any other factors such as fees or discounting of the face value. The face rate is simply the rate stated on the note, while the contract rate refers to the legally agreed-upon rate. The stated rate may or may not be the same as the effective rate.

The Rate of Interest That Actually Is Incurred on a Note