Understanding Annual Percentage Rate (APR)

This video tutorial explains the concept of Annual Percentage Rate (APR), highlighting its importance in understanding the true cost of borrowing money. APR includes interest rates and additional fees, providing a comprehensive view of loan costs. The video guides viewers through calculating APR using a simple example, emphasizing its role in comparing loan products and making informed financial decisions.

What is the main topic discussed in the video?

• Loan Amortization

• Compound Interest

• Simple Interest

• Annual Percentage Rate (APR)

What does APR stand for?

• Annual Payment Rate

• Annual Percentage Rate

• Annual Principal Rate

• Annual Profit Rate

Which of the following is included in APR?

• Only fees

• Principal amount

• Only interest

• Interest and fees

Why is APR important when comparing loan products?

• It shows the total cost of borrowing

• It only shows the interest rate

• It excludes service charges

• It is the same for all loans

What is the first step in calculating APR?

• Determine the principal amount

• Calculate the interest rate

• Identify finance charges

• Compare different loans

In the given scenario, what is the principal amount borrowed?

• $1000

• $500

• $100

• $250

What is the total finance charge in the example provided?

• $75

• $32

• $25

• $50

How is APR expressed?

• As a decimal

• As a fraction

• As a percentage

• As a whole number

What is the APR calculated in the example?

• 8%

• 7%

• 6.4%

• 5%

What would the interest rate be without considering additional fees?

• 3%

• 4%

• 6%

• 5%