Annual Percentage Rate (% APR) 1
Annual Percentage Rate (% APR) 1 :
A unit used in the U.S. for stating interest rates and rates of return on investment. By federal regulation, these rates can be stated however a financial institution wishes, but they must be stated also in % APR so that consumers can compare rates of different loans and investment opportunities. Mathematically, the natural rate r of return on money is the "instantaneous" rate, the rate that allows for compounding of interest continuously. The APR is the percentage growth rate a of the money over a period of one year, as if interest were compounded annually. The two rates are related by the formulas a = er - 1 and r = ln (1 + a), where er is the natural exponential function and ln is the natural logarithmic function
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