Which of the following must not be included when calculating APR?

When calculating the Annual Percentage Rate (APR), certain costs and fees associated with a loan are included, while others are excluded. The accurate understanding is that late payment fees are not included in the APR calculation because they are contingent upon the borrower's behavior and, therefore, cannot be anticipated upfront or factored into the cost of borrowing.

APR is designed to give borrowers a comprehensive view of the cost of borrowing over a year, incorporating charges that are financed into the loan. This includes interest charges, loan origination fees, and discount points since they represent the costs that can be estimated and are paid in relation to obtaining the loan. Late payment fees, on the other hand, are not known until a payment is missed and depend on the borrower's choices, making them variable rather than fixed costs of the loan. Thus, they do not contribute to an accurate calculation of the true cost of credit embodied in the APR.