Understanding Annual Percentage Rate (APR)
Which statement about the Annual Percentage Rate (APR) is NOT true? Add an explanation.
a) If the APR is 6%, you will pay 6% of the loan balance per month.
b) The APR takes into account the fees for a loan.
c) The APR for a loan depends on when the loan must be repaid.
d) The APR helps compare loans with the same payback period but different monthly rates and fees.
Final answer:
The false statement about APR is that you will pay 6% of the loan balance per month if the APR is 6%. APR is an annual rate, and it includes fees for a loan but is divided by 12 to get the monthly interest rate.
Explanation:
The statement about the Annual Percentage Rate (APR) that is NOT true is: If the APR is 6%, you will pay 6% of the loan balance per month. This statement is incorrect because APR is expressed as an annual rate. Although the APR includes fees for a loan, this annual rate is generally divided by 12 to calculate the monthly interest rate, not directly applied each month. Therefore, you would not pay 6% of the loan balance per month; instead, you'd pay approximately 0.5% per month if the APR is 6%. The APR reflects the annual cost of a loan to a borrower, including fees, and it is used to compare loans with the same repayment period.
Which statement about the Annual Percentage Rate (APR) is NOT true? Add an explanation. The false statement about APR is that you will pay 6% of the loan balance per month if the APR is 6%. APR is an annual rate, and it includes fees for a loan but is divided by 12 to get the monthly interest rate. Explanation: The statement about the Annual Percentage Rate (APR) that is NOT true is: If the APR is 6%, you will pay 6% of the loan balance per month. This statement is incorrect because APR is expressed as an annual rate. Although the APR includes fees for a loan, this annual rate is generally divided by 12 to calculate the monthly interest rate, not directly applied each month. Therefore, you would not pay 6% of the loan balance per month; instead, you'd pay approximately 0.5% per month if the APR is 6%. The APR reflects the annual cost of a loan to a borrower, including fees, and it is used to compare loans with the same repayment period.