Finance
The annual percentage rate (APR) on a mortgage is HIGHER than the stated interest rate because it:
AIncludes the lender's profit margin
BIncludes the interest rate plus certain fees and costs expressed as a yearly rate✓ Correct
CReflects the compounded interest cost
DIs always 0.25% above the prime rate
Explanation
The APR is a broader measure of borrowing cost that includes the interest rate plus certain fees and costs (origination fees, points, mortgage insurance premiums) expressed as a yearly rate. This makes it a more complete measure of the true cost of borrowing.
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