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

Question

Quizplus · Accepted Answer

The annual percentage rate (APR) is the quoted interest rate which, considered with the compounding period, gives the effective interest rate. It reflects the true cost of borrowing by including any fees associated with the loan. However, it does not take into account the effect of compounding interest.

Which of the Following Best Describes the Annual Percentage Rate