Finance
Under the Truth in Lending Act (TILA), Minnesota lenders must disclose the Annual Percentage Rate (APR) to borrowers. What does the APR represent?
AThe base interest rate only
BThe total cost of credit expressed as an annual rate, including fees✓ Correct
CThe lender's profit margin
DThe prime rate plus the margin
Explanation
The APR (Annual Percentage Rate) represents the true cost of borrowing, including the interest rate plus other financing charges such as origination fees, discount points, and mortgage insurance. Lenders must disclose the APR to Minnesota borrowers under TILA to allow meaningful comparison shopping among loan products.
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