If you borrow money at .75% per month, what is the APR for that loan?

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Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If you borrow money at .75% per month, what is the APR for that loan?

Explanation:
APR is the annual rate expressed for a year. If the loan charges 0.75% per month, you convert to a yearly rate by multiplying by 12, giving 0.75% × 12 = 9% per year. This reflects the nominal APR, assuming simple annualization and no monthly compounding. If you wanted the exact effective rate with monthly compounding, it would be (1 + 0.0075)^12 − 1 ≈ 9.38%, but the common test assumption for APR is the straightforward 9%. So the best answer is 9%.

APR is the annual rate expressed for a year. If the loan charges 0.75% per month, you convert to a yearly rate by multiplying by 12, giving 0.75% × 12 = 9% per year. This reflects the nominal APR, assuming simple annualization and no monthly compounding. If you wanted the exact effective rate with monthly compounding, it would be (1 + 0.0075)^12 − 1 ≈ 9.38%, but the common test assumption for APR is the straightforward 9%. So the best answer is 9%.

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