The nominal interest rate of a loan is:
A. the maximum rate that may be charged by law
B. the rate the borrower will actually pay, reflecting the total finance charge
C. the amount of projected interest on an annualized rate
D. the interest rate stated on the promissory note
Answer: D. the interest rate stated on the promissory note
Explanation: The nominal interest rate is the rate stated on the promissory note. This is in contrast to the effective rate (also called the annual percentage rate), the rate that the borrower will actually pay, taking all of the other finance charges as well as the interest into account.
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