The name per annum is a Latin word, which merely translates to per year or otherwise known as annually. It is also commonly applied to financial and banking, employment contracts, to insurance policies and documents of investment to define the amount that will be computed or paid in one year. This term is critical to understand as it would make you interpret interest rates, salaries, fees, and returns in a correct manner.
When dealing with banking and finance you will find a lot of interest rates calculated in terms of percentage per annum (p.a.). To illustrate, when a savings account has an annual interest rate of 6 per cent, then it implies that your money will be making interest of 6 per cent. Nonetheless, the method of interest application can have an impact on the cumulative interest, although the quoted interest rate is the same: simple or compound. Another way businesses apply per annum is the description of the annual expenses such as maintenance payments, insurance cover, or lease payments.
In employment, 600, 000 per annum is the amount of salary quoted to the employee, which is annually paid, normally in monthly payments. The word eliminates misunderstandings by explaining that the figure is the pay of a complete year and not a monthly or weekly fee.
Per annum is used by investors as a way of knowing returns on investments like bonds, fixed deposits or mutual funds. As an example, an investment with a 10 percent yearly returns will suggest that a 10 percent gain will be realized in a normal condition.
There is also the use of per annum in legal and other contractual documents to determine uniform annually. This would make it simple and avoid confusion particularly in cases where financial pledges or calculations are at stake.
In brief, per annum is a useful shortcut which makes financial terms standard and allows to compare them more easily, comprehend long-term investment costs and make proper choices. It may be a loan, salary package or investment, but by knowing what per annum means, you can be able to interpret the numbers with a lot of assurance.