### What does APR stand for in finance? - [x] Annual Percentage Rate - [ ] Annual Payment Ratio - [ ] Accumulated Payment Rate - [ ] Average Percentage Rate > **Explanation:** APR stands for Annual Percentage Rate, which represents the annual rate charged for borrowing or earned through an investment. This rate includes fees and interest over the life of the loan. ### What is included in the calculation of the APR? - [x] Interest and certain fees - [ ] Only the interest rate - [ ] Transaction frequency - [ ] Property taxes > **Explanation:** The APR calculation includes the interest as well as certain fees and charges that are not directly related to interest, in order to represent the true cost of borrowing. ### Which U.S. law requires lenders to disclose the APR to borrowers? - [x] Truth in Lending Act - [ ] Federal Reserve Act - [ ] Banking Secrecy Act - [ ] Dodd-Frank Act > **Explanation:** The Truth in Lending Act requires lenders to disclose the APR to borrowers before signing loan documents, ensuring borrowers have complete transparency about the annual cost of the loan. ### Why must lenders in the U.S. provide the APR to borrowers three days before closing a loan? - [ ] To comply with local state laws - [ ] To offer a negotiation period - [x] To ensure borrowers can make informed comparisons - [ ] To provide an early payment incentive > **Explanation:** Requiring lenders to provide the APR three days before closing allows borrowers to compare this rate among different lenders and make well-informed decisions regarding their loans. ### Which act requires APR computation through multiplying the periodic interest rate by the number of annual compounding periods? - [ ] Glass-Steagall Act - [ ] Home Mortgage Disclosure Act - [x] Truth in Lending Act - [ ] Fair Housing Act > **Explanation:** The Truth in Lending Act mandates that APR must be computed by multiplying the periodic interest rate by the number of annual compounding periods and includes certain fees to present the loan's true cost. ### What can the APR be used to compare? - [x] Rates between different lenders - [ ] Loan application processes - [ ] Fees at different banks - [ ] Monthly payment amounts > **Explanation:** The APR allows borrowers to compare the overall cost of borrowing, including interest and certain fees, between different lenders, aiding in selecting the most cost-effective loan. ### When referring to a mortgage, what does the APR represent? - [ ] The tax rate on the property - [x] The annual cost of the loan - [ ] The monthly payment amount - [ ] The percentage of the down payment > **Explanation:** For a mortgage, the APR represents the annual cost of the loan, including interest and certain fees, providing a comprehensive picture of the loan expense over a year. ### How often is the APR supposed to be presented by the lender to a borrower? - [ ] Weekly - [ ] At loan application - [x] Before signing loan documents - [ ] When the interest rate changes > **Explanation:** Lenders must disclose the APR before the borrower signs the loan documents to ensure the borrower understands the cost implications and can make an informed decision. ### Which aspect makes the APR different from the simple interest rate? - [ ] APR includes the raw interest rate only - [x] APR includes interest plus additional fees and charges - [ ] APR is higher than the interest rate always - [ ] APR is not legally required to be disclosed > **Explanation:** The main distinction between APR and a simple interest rate is that APR includes the interest rate plus additional fees and charges associated with borrowing, thereby reflecting the true cost of the loan. ### Why is it important for a borrower to understand the APR of a loan? - [ ] It dictates the loan's approval - [ ] It gives insight into loan tenure - [x] It represents the true annual cost of borrowing - [ ] It calculates daily interest accrual > **Explanation:** Understanding the APR is crucial because it represents the true annual cost of borrowing, including both interest and necessary fees, enabling the borrower to effectively compare different loan offers and make informed decisions.