Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR). How does the APR differ from the interest rate?
AAPR is always lower than the interest rate
BAPR includes the interest rate plus certain fees and costs, giving the true cost of borrowing✓ Correct
CAPR is only used for adjustable-rate mortgages
DAPR and interest rate are identical for fixed-rate loans
Explanation
The APR reflects the true cost of a loan by including the stated interest rate plus certain fees (origination fees, points, mortgage broker fees), expressed as an annual rate. It is typically higher than the stated interest rate.
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