Question

Annual percentage rates (APRS) are computed using

A) best estimates of expected real costs.
B) simple interest
C) compound interest
D) either simple interest or compound interest
E) None of the options are correct.

Answer 1

APRs are computed using compound interest which is an interest rate calculation that is earned on both the principal amount and the accumulated interest. Simple interest is only calculated on the principal amount.

Step-by-step explanation:

Annual percentage rates (APRs) are computed using compound interest. Compound interest is an interest rate calculation that is earned on both the principal amount and the accumulated interest. It causes the total amount of savings to grow dramatically over time. Simple interest, on the other hand, is an interest rate calculation only on the principal amount.