Annual Percentage Rate (APR)

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Definition: Annual Percentage Rate (APR)

Annual Percentage Rate (APR) is also referred to as the nominal APR. It is the simplified measure of an annualized percentage rate in terms of simple interest without taking into account the effect of compounding.

It is different from the Annual Percentage Yield (APY) in the way that it also accounts for the compound interest while APR does not.


Consider a loan which charges 0.5% per month interest.

APR = 0.5*12 = 6% per annum

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