Which of the following best describes the annual percentage rate?
A)the discount rate when compounded more than once a year or less than once a year
B)the quoted interest rate which considered with the compounding period gives the effective interest rate
C)the discount rate when it is divided by the number of times it is compounded in a year
D)the effective annual rate after compounding is taken into account

Question

Quizplus · Accepted Answer

The annual percentage rate (APR) is the quoted interest rate on a loan or investment, which when considered with the compounding period (i.e., how often interest is calculated and added to the principal balance), gives the effective interest rate. It does not take into account fees and other charges, and is typically expressed as a yearly rate even if interest is compounded more or less frequently than annually. Therefore, choice B is the best description of the APR.

Which of the Following Best Describes the Annual Percentage Rate