Which One of the Following Statements Concerning the Annual Percentage

question 117

Multiple Choice

Which one of the following statements concerning the annual percentage rate is correct?

• A) The annual percentage rate considers interest on interest.
• B) The rate of interest you actually pay on a loan is called the annual percentage rate.
• C) The effective annual rate is lower than the annual percentage rate when an interest rate is compounded quarterly.
• D) When firms advertise the annual percentage rate they are violating U.S. truth-in-lending laws.
• E) The annual percentage rate equals the effective annual rate when the rate on an account is designated as simple interest.

---

Definitions:

Fiscal Year

A one-year period that companies use for accounting and financial reporting, which may or may not align with the calendar year.

Adjusting Entry

An accounting entry made at the end of an accounting period to allocate income and expenditure to the appropriate period for a more accurate financial statement.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting its loss of value over time.

Equipment

Tangible assets used in the operation of a business, such as machinery, computers, and tools.