Key points are not available for this paper at this time.
Both the contract interest rate and the annual percentage rate indicate the price of a loan. Consumer's understanding of these two measures of the price of closed-end consumer loans was examined using the 1997 University of Michigan Survey of Consumers. Among the mortgage borrowers, at least 40% of respondents failed to understand the relationship between these two price measures; education, quantity and quality of information search, and region were found to influence their understanding. The authors draw implications for improving information disclosure in consumer credit markets.
Lee et al. (Mon,) studied this question.