Definition of Annual Percentage Rate

The Annual Percentage Rate (APR) is the amount of interest that is due (in case of loan taken) to pay in the span of a year. Here the compounding effect is not applicable in this payment.

On the contrary, when a body lends money the APR would be the amount to be received by that body in the span of 1 year without the compounding effect.

Example of Annual Percentage Rate:

Abby took a loan of $100 from Hanna with an APR of 10%. So, the amount that Abby is due to pay at the end of the year would be $10. Here in this case there is no compounding effect.

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