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Ever heard someone mention “per annum” and felt a little lost? You’re not alone! What Does It Mean To Say Per Annum? Simply put, it means “per year.” It’s a common term used in finance and economics to express an amount, rate, or payment over a one-year period. Understanding this term is crucial for interpreting financial information accurately.
Decoding “Per Annum” The Annual Perspective
The phrase “per annum” comes from Latin, literally translating to “by the year.” When you see an interest rate described as “5% per annum,” it means that the interest accrued or paid is 5% of the principal amount each year. Similarly, a salary of “$50,000 per annum” indicates that the total yearly income is $50,000. This standard yearly timeframe is essential for comparing different financial products or situations. Using a standard time frame allows for apples-to-apples comparisons.
Think of it this way. Without the “per annum” clarification, numbers can be deceiving. For example, imagine these scenarios:
- Earning $1,000 interest on an investment sounds good… until you realize that’s over five years!
- A loan with a “low” fee might seem attractive initially, but it’s actually charged every month.
That’s where “per annum” plays its role. It’s the standard to which everything else is compared. When someone says “per annum,” it clears up confusion about the period to which the value applies to.
Here’s a simple table illustrating how “per annum” clarifies things:
| Statement | Meaning |
|---|---|
| Interest rate: 1% per month | Effective annual rate is higher than 1% due to compounding (approximately 12.68% per annum). |
| Salary: $4,000 per month | Annual salary is $48,000 per annum ($4,000 x 12). |
Now that you understand what “per annum” means, let’s dive a bit deeper. For more detailed explanations and real-world examples of how “per annum” is used, consider exploring investopedia.com. It’s a great resource for understanding financial terms and concepts.