Finance
In South Dakota, the 'effective interest rate' on a mortgage differs from the 'nominal rate' because it:
AIncludes both principal and interest in the calculation
BReflects the actual cost considering compounding periods and fees✓ Correct
CIs always lower than the nominal rate
DIs set by the South Dakota Division of Banking
Explanation
The effective interest rate (APR) reflects the true cost of borrowing by incorporating fees and the compounding effect, providing a more accurate comparison of loan costs than the nominal (stated) rate alone.
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