Annual Percentage Rate - APR

Annual Percentage Rate - APR
The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.

Loans or credit agreements can vary in terms of interest-rate structure, transaction fees, late penalties and other factors. A standardized computation such as the APR provides borrowers with a bottom-line number they can easily compare to rates charged by other potential lenders.

By law, credit card companies and loan issuers must show customers the APR to facilitate a clear understanding of the actual rates applicable to their agreements. Credit card companies are allowed advertise interest rates on a monthly basis (e.g. 2% per month), but are also required to clearly state the APR to customers before any agreement is signed. For example, a credit card company might charge 1% a month, but the APR is 1% x 12 months = 12%. This differs from annual percentage yield, which also takes compound interest into account.

Investment dictionary. . 2012.

Look at other dictionaries:

  • annual percentage rate of charge — bendros vartojimo kredito kainos metinė norma statusas Aprobuotas sritis civilinė teisė ir procesas apibrėžtis Bendra vartojimo kredito kaina, išreikšta metiniu procentų dydžiu. atitikmenys: angl. annual percentage rate of charge vok. effektiver… …   Lithuanian dictionary (lietuvių žodynas)

  • annual equivalent rate — noun An interest percentage rate calculated as if it were paid and compounded once a year (abbrev AER) • • • Main Entry: ↑annual …   Useful english dictionary

  • Annual Percentage Yield - APY — The effective annual rate of return taking into account the effect of compounding interest. APY is calculated by: The resultant percentage number assumes that funds will remain in the investment vehicle for a full 365 days. The APY is similar in… …   Investment dictionary

  • annual percentage yield — ( APY) A precisely calculated measure of yield paid on a bank deposit account. American Banker Glossary ( APY) The effective, or true annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect… …   Financial and business terms

  • Annual percentage yield (APY) — The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of… …   Financial and business terms

  • annual percentage yield — /ˌænjuəl pəˌsentɪdʒ ji:ld/ noun the annual rate of compound interest earned by an account. Abbreviation APY …   Dictionary of banking and finance

  • stated annual interest rate — The interest rate expressed as a per year percentage, by which interest payments are determined. Bloomberg Financial Dictionary See: annual percentage rate. Bloomberg Financial Dictionary …   Financial and business terms

  • Stated Annual Interest Rate — The return on an investment that is expressed as a per year percentage, and that does not account for compounding that occurs throughout the year. The effective annual interest rate, on the other hand, does account for intra year compounding that …   Investment dictionary

  • Compound Annual Growth Rate - CAGR — The year over year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being… …   Investment dictionary

  • Stated annual interest rate — The interest rate expressed as a per annum percentage, by which interest payment is determined. The New York Times Financial Glossary …   Financial and business terms

  • Rate of return — In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”