Question

Which of the following statements about annual percentage rate (APR) and effective annual rate (EAR) are...

Which of the following statements about annual percentage rate (APR) and effective annual rate (EAR) are not true?

1-The annual percentage rate (APR) is considered a more accurate measurement of what you will actually pay.

2-Lenders are legally required to show potential borrowers the effective annual rate (EAR) on any loan offered.

3-The difference between APR and EAR is not that large.

4-None of the above are untrue statements.

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Answer #1

The correct option is 4th

Annual Percentage rate is the Nominal rate of interest that does not take compounding period into effect due to the compounding periods in the year and it is legally to be shown by the lenders.

While, Effective rate of interest is the actual measurement of the rate of interest that boorower have to pay annually, it takes the compounding into effect.

The difference in the APR and EAR varies due to the Compounding period, so it can not be measured.

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