Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR). The APR differs from the interest rate because it:
AIs always lower than the stated interest rate
BIncludes the interest rate plus certain fees and costs, representing the true cost of borrowing✓ Correct
CIs set by the Federal Reserve for all mortgages
DApplies only to adjustable-rate mortgages
Explanation
APR is a broader measure of the cost of credit. It includes the stated interest rate plus certain fees and costs (such as points, origination fees, and mortgage insurance), expressed as an annual rate. The APR allows borrowers to compare the true cost of loans with different fee structures.
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