Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR). The APR differs from the stated interest rate in that it:
AIs always lower than the stated interest rate
BReflects the true cost of borrowing by including fees and other finance charges✓ Correct
CIs set by the Federal Reserve
DIs the same as the monthly interest rate multiplied by 12
Explanation
The APR reflects the true annual cost of borrowing by including the interest rate plus certain fees and finance charges (such as origination fees and mortgage insurance), expressed as a percentage. It is typically higher than the stated interest rate alone.
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