Annual Percentage Rate (APR)

Basics

• Often used besides but should not be confused with APY
• From Investopia (21-8-2020):

"The term “annual percentage rate (APR)” refers to the annual rate of interest charged to borrowers and paid to investors. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income earned on an investment. This includes any fees or additional costs associated with the transaction, but it does not take compounding into account. The APR provides consumers with a bottom-line number they can easily compare with rates from other lenders."

• From APRtoAPY (18-1-2022):

"APR is the annual rate of return before factoring in compound interest. APR only takes into account simple interest. You’ll run into APR most often when considering loan terms, and how much you’ll have to pay to borrow.

How do you calculate APR?

APR = [(Fees + Interest)/Principal] x (Number of Years) x 100

To calculate APR:

1. Add up all fees and interest to be paid over the life of the loan.
2. Divide the total fees and interest by the principal.
3. Divide the result by the total period of the loan, in years.
4. Multiply the result by 100.

The result is your Annual Percentage Rate expressed as a percentage."