Annual percentage rate
Annual percentage rate (better known by its acronym, APR; alternatively known as annual interest rate, interest rate per year, interest rate earned per year; as symbols also referred as i, I, I/YR, and r; hereinafter, APR) is the nominal annual interest rate or, in other words, the rate of return that is applied over a period of one year.
Theoretically, interest rate, lease rate, and rate of return may be applied over different periods. Unless that different period is specifically mentioned, all of them practically mean APR as well.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- APR. The nominal annual interest rate is also called the annual percentage rate.
Description
ARP is what a lender charges a borrower and a borrower pays a lender, expressed as a percentage of the principal. If a bank gives a loan to a business, the bank charges its interest. When an individual deposits money into a savings account in a bank, this employee expects his or her interest to be added to the principal amount of the deposit.
Usually, the borrowed resource is a building, cash, enterprise assets such as inventory or technology, consumer products such as college tuition or vehicle, or any other asset that the borrower needs and the lender has.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
