Which one of the following statements concerning the annual percentage rate (APR) is correct?

The APR considers interest on interest.
The rate of interest you actually pay on a loan is called the APR.
The effective annual rate is lower than the APR when an interest rate is compounded quarterly.
Lenders are not permitted to disclose or advertise the APR of a loan.
The APR equals the effective annual rate when simple interest is applied to a loan.

Expert Solution

EAR = ((1+APR/n)^n) - 1

EAR > APR

But when Simple interest is taken APR will be same as EAR.

Option 5 is correct.

jeff jeffy answered 2 years ago

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