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Aleja Aleja
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6 years ago
The annual percentage rate, or APR, is equal to the quoted rate as long as there are no additional financing costs. However, in practice, you might have to pay a loan origination fee, points on a mortgage, a loan processing fee, or some other fee. When you pay these additional monies to obtain a loan, it effectively increases the cost of the loan. APR in practice factors these additional costs into the interest rate and provides an adjusted rate that reflects these additional costs. Go to the following website and play with the APR calculator.

http://www.efunda.com/formulae/finance/apr_calculator.cfm

1. What happens to APR when you increase the fees associated with the loan?

2. What happens to the APR when you reduce the financing time period?

3. What happens to the APR if you reduce the fees to zero?
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baymeebaymee
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6 years ago
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