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What Does “Per Annum” Mean?

Per Annum

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Per Annum

“Per annum” is a Latin term that translates to “by the year” or “annually” in English. It is commonly used in finance and a variety of other fields to express a frequency of an event or a rate of change on an annual basis.

For example, if an investment offers a 5% interest rate per annum, it means that the interest is paid or compounded once per year. If a salary is stated as $50,000 per annum, it means that this is the amount to be paid over the course of a year. If a business’s growth rate is 7% per annum, it means that the business is expected to grow by 7% each year.

So, whenever you see “per annum”, it is referring to something that happens each year or annually.

Example of “Per Annum”

Let’s look at some examples:

  • Interest Rates: Suppose you invest $10,000 in a savings account that earns an interest rate of 2% per annum. This means that each year, you’ll earn 2% of $10,000, or $200, in interest.
  • Salaries: If a job offer states a salary of $80,000 per annum, this means that the total salary paid over one year will be $80,000, before any deductions like taxes or retirement contributions.
  • Business Growth: A business reports that its revenue is growing at 10% per annum. This means that, on average, the revenue of the business is expected to increase by 10% each year.
  • Loans: If you take out a loan with an annual interest rate (APR) of 5% per annum, this means that you will be charged 5% of the outstanding balance of the loan as interest every year.

Remember, “per annum” simply means that the stated rate or amount is applied on an annual basis.

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