Most of us have seen this as APR or Annual Percentage Rate on a loan. This is a very important concept as it shows us the cost of financing using time value of money concepts. Although we are not using time value of money tables, charts, etc., the APR tells the borrower the actual cost of financing. if possible, use a world example, maybe a car loan , or home mortgage, with the interest rate on the loan and the APR which is the effective rate of interest. If you do not have a personal example, find an example from a bank/lender, such as a 30 year home mortgage.