Question

In: Accounting

Banks often advertise loans using APR, as do automobile dealers, and other creditors. Should you compare...

Banks often advertise loans using APR, as do automobile dealers, and other creditors. Should you compare interest rates using APR? In the discussion include information about the difference between APR and EAR.

Solutions

Expert Solution

Answer :-

a) The term annual percentage rate of charge, corresponding sometimes to a nominal APR and sometimes to an effective APR, is the interest rate for a whole year, rather than just a monthly rate, as applied on a loan, mortgage loan, credit card, etc.

Compare interest rates using APR:-

a) An annual percentage rate is a broader measure of the cost of borrowing money than the interest rate.

b) The APR reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan.

c) APR is usually higher than your interest rate.

Difference bewtween APR and EAR:-

a) The main difference between APR and EAR is that APR is based on simple interest, while EAR takes compound interest into account.

b) APR is most useful for evaluating mortgage and auto loans, while EAR is most effective for evaluating frequently compounding loans such as credit cards.

Thank you.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in...
When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck...
Investors, creditors, and other users of financial statements often argue that there should be more transparency...
Investors, creditors, and other users of financial statements often argue that there should be more transparency on published financial statements. This argument is based, at least some extent, on concerns that management has too much leeway in the selection of accounting alternatives. Team 1: Argue that management should continue to be allowed to choose among different accounting alternatives because full disclosure in the notes to financial statements provides sufficient transparency.
Consider if external costs should be included in the automobile production.What costs do you think should...
Consider if external costs should be included in the automobile production.What costs do you think should be included as inventory in car production that do not fall in the descriptions we have seen thus far? For full credit, please post a minimum of three external costs that you believe are not accounted for by automobile manufacturing businesses. Be specific as to what the external cost is and how it might be measured, just saying pollution will not suffice. You must...
What type of reforms of money markets do you think central banks should undertake (or not!)?...
What type of reforms of money markets do you think central banks should undertake (or not!)? Why?
What do you personally believe that businesses and other participants in economic markets should do in...
What do you personally believe that businesses and other participants in economic markets should do in order to make a positive contribution to society? Why? From a societal perspective, how can we distinguish between "good" strategy and "bad" strategy? Can you give some specific examples of each?
Do you think Firms and other entities such as investment and retirement should be included in...
Do you think Firms and other entities such as investment and retirement should be included in Circular 230 outlines ? Why? Firms and other entities such as investment and retirement should be included in Circular 230 outlines. These firms also have an obligation to their clients that the information that they are providing them is free of events that could lead to misrepresentation of tax paperwork. For example, with the new secure act for a qualified individual retirement accounts of...
Do you think Firms and other entities such as investment and retirement should be included in...
Do you think Firms and other entities such as investment and retirement should be included in Circular 230 outlines ? Why? Firms and other entities such as investment and retirement should be included in Circular 230 outlines. These firms also have an obligation to their clients that the information that they are providing them is free of events that could lead to misrepresentation of tax paperwork. For example, with the new secure act for a qualified individual retirement accounts of...
Do you think the U.S. jury system should be adopted by other countries? What factors do...
Do you think the U.S. jury system should be adopted by other countries? What factors do you think should inform a country’s decision to adopt a jury system? Identify situations in which you would choose ADR over litigation. Explain your answer. Do the same for situations in which you would choose litigation over ADR. Provide a list of topics that you would present to employees to train them to be vigilant against criminal behavior in your organization. What topics do...
Compare ownership of land in the urban and rural sectors. Do you think China should privatize...
Compare ownership of land in the urban and rural sectors. Do you think China should privatize the agricultural land?
3. How do you compare Qatar and one other emerging market? Explain the commonalities and differences...
3. How do you compare Qatar and one other emerging market? Explain the commonalities and differences with specific examples. Highlight the rationale for purchasing behavior that is the same or different for women vs. men in each country. What are the political, religious, cultural norms and their impact on global merchandising?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT