Assuming All APRs Equal, the Effective Interest Rate on a Loan

question 14

Multiple Choice

Assuming all APRs equal, the effective interest rate on a loan is highest when:

• A) The loan has no points and a 30 year maturity and is prepaid in five years
• B) The loan has no points and is prepaid at maturity
• C) Points are charged and the loan is paid off at maturity in 30 years
• D) Points are charged and the loan has a 30 year maturity but prepaid in five years

---

Definitions:

Additional Terms

Additional clauses or stipulations added to a contract or agreement that are not part of the original proposal or negotiation.

Merchant

A person who is engaged in the purchase and sale of goods. Under the Uniform Commercial Code, a person who deals in goods of the kind involved in the sales contract; for further definitions, see UCC 2–104.

Original Offer

The initial proposal or bid made during negotiations or contractual discussions, from which subsequent offers may be derived.

New Terms

Newly established conditions or concepts introduced within a specific context, such as agreements or industries.