Finance
The annual percentage rate (APR) on a Michigan mortgage loan will typically be higher than the stated interest rate because:
AThe lender adds a risk premium to the APR
BThe APR includes the interest rate plus other finance charges such as points and fees✓ Correct
CAPR is calculated using compound interest while the rate uses simple interest
DMichigan law requires APR to be inflated for consumer protection
Explanation
APR includes the interest rate plus other costs of credit (points, fees, mortgage insurance) expressed as an annual rate. This makes APR higher than the stated interest rate and allows comparison of total loan costs.
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