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The APR Can Be a Controversial Measure of Borrowing Cost

Question 32

Multiple Choice

The APR can be a controversial measure of borrowing cost because it tends to:


A) overstate the true borrowing cost by assuming we hold mortgage until maturity
B) understate the true borrowing cost by assuming we hold mortgage until maturity
C) overstate the true borrowing cost by assuming we do not hold mortgage until maturity
D) understate the true borrowing cost by assuming we do not hold mortgage until maturity

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