Which statement about APR is true?

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Multiple Choice

Which statement about APR is true?

Explanation:
APR is the annual cost of borrowing presented as a single percentage that includes interest and certain fees. This makes it the best way to compare loans, because you’re seeing not just the charge for using money, but the extra costs that come with the loan, all annualized. So the statement that APR includes interest plus fees, expressed as an annual percentage, captures the true annual cost of borrowing and is thus correct. It’s not merely the nominal interest rate, and it doesn’t ignore fees—the whole point of APR is to reflect those additional costs in one figure.

APR is the annual cost of borrowing presented as a single percentage that includes interest and certain fees. This makes it the best way to compare loans, because you’re seeing not just the charge for using money, but the extra costs that come with the loan, all annualized.

So the statement that APR includes interest plus fees, expressed as an annual percentage, captures the true annual cost of borrowing and is thus correct. It’s not merely the nominal interest rate, and it doesn’t ignore fees—the whole point of APR is to reflect those additional costs in one figure.

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