Question

Banks and other lenders are required to disclose a rate called the APR. What is this rate? Why did Congress require that it be disclosed? Is it the same as the effective annual rate? If you were comparing the costs of loans from different lenders, could you use their APRs to determine the loan with the lowest effective interest rate? Explain.

Answer 1

we Knoo ttat Solution From the given in formation, APR (Auad Percentage fate indicates e Statd Yad c întesert on the loan or învestrmentt. Tn order to dtermine among he can /investmest cteaing, Tt is eneficid tat awaikekle know The lecan with louwer APR is prtteratle. ttets shoulde with is charged fol the simply APR s detined au o owing by Banh and other lender the browe e discosed Becaue Congress vequined t that what peceniage Afey chorge d by Bank Shoula nou be cheated by benk and and othe (ender , So, they Can not lencer and bcntower must have Aranparency other de posiing fa thei bor. legisation which s înttnded to on the boe wng ohat inteest they Fedezad lending tuiFTL)is Protect Ah Consumer inteest. Urdez e FTL endez mt All te financial fnfarmetion in loar arement in) disclose aralogous Thu the Consume Can Compare tbe loan manneL intcest at among dibteruot loa prov ider amount and ohich is based on eshmety, he RESPA disclosue Like The FTL disclosure the APR fs under acurtaly disclose Disc lose under the FTL Ettechve Anual interest Rat CEAR) ts he The actal Yate ob Interest easned /charged. Th, is dibteu fom Tate ohith s he nowinintegest Simply intasestata is is kecause the etteetive Intuejt rate the Stated Considas Compounding

f annua nest compeuneding more than once in gjeah - EMR fosmula to Comput EnR fs The EAR l- APR Compaunding tn ayea is Number at where O Carm pas ing these s compounding to the Cost of loam from othel lendes: APR more han once in yea to detemine the £fAR_0therwise ApR is (buoe than EAR sed Concened fs APR So APR is equcl to ettectwe annud vale (EAR) when the Ya frequently Compeunding eccurs ompeunded anneatly エト ettec Hiveate becomes qreata than APR. Ir instrumead the Compartd wite sam no.ot peundtng yearly Compased oir ne anothe. Or Cempasiso0 then nomina ase basis foi shou pul O the EAR as ot inskumen} Comparisans please Rate *