Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR). The APR differs from the stated interest rate because it includes:
AOnly the principal and interest components
BThe interest rate plus certain fees and costs associated with the loan✓ Correct
CProperty taxes and insurance premiums
DThe lender's profit margin
Explanation
The APR reflects the true cost of borrowing by including the stated interest rate plus certain fees and costs (such as origination fees and points) expressed as a yearly rate. This allows borrowers to compare loans from different lenders on an apples-to-apples basis.
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