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.

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Definitions:

Obligations

Legal or financial duties that one party owes another, such as debt repayment or service delivery.

Operating Cycle

The time it takes for a company to make an initial outlay of cash to produce goods or services and then receive cash back from selling these goods or services.

Accounting Cycle

The sequence of steps followed in the accounting process to record and summarize financial transactions throughout a period and prepare financial statements.

Journalizing Transactions

The process of recording business transactions in the journal as part of the accounting process.