Per Annum

Definition

Per Annum is derived from Latin, meaning “by the year.” It indicates an annual occurrence, most commonly used in financial contexts to describe rates, fees, or other quantities calculated or paid yearly. This term frequently appears in scenarios such as interest rates, insurance premiums, and contractual agreements.

Examples

Interest Rates: A mortgage may have an interest rate expressed in per annum terms, such as an annual interest rate of 5% per annum.
Insurance Premiums: Home insurance might require a premium payment of $1,200 per annum.
Employee Salaries: An employee’s salary might be $60,000 per annum, implying the total yearly compensation.

Frequently Asked Questions (FAQs)

What does “per annum” mean in financial terms?

“Per annum” means “by the year” in financial terms and is used to express annual interest rates, fees, or payments.

Can “per annum” be used for periods longer or shorter than a year?

No, “per annum” specifically refers to an annual basis—periods shorter would be pro rata, and longer would still be better expressed in terms of years.

How is “per annum” different from “annually”?

“Per annum” is typically used in formal financial contexts and for expressing rates, while “annually” is more commonly used in general English to convey something that happens once a year.

Is “P.A.” a common abbreviation for “Per Annum”?

Yes, “P.A.” is a widely accepted abbreviation for “Per Annum” across various official documents and contexts.

Pro Rata: Proportional allocation for a period less than a year.
Per Diem: Daily rates or allowances, derived from Latin meaning “by the day”.
Annual Percentage Rate (APR): The annual rate charged for borrowing or earning through an investment.
Fiscal Year: A one-year period that companies and governments use for accounting and financial reporting.

Online Resources

References

“Fundamentals of Financial Accounting” by Fred Phillips, Robert Libby, Patricia Libby.
“Financial Accounting: An Introduction” by Pauline Weetman.
“Introduction to Finance” by John R. Graham and Scott B. Smart.

Suggested Books for Further Studies

“Understanding Financial Statements” by Lyn M. Fraser and Aileen Ormiston.
“Principles of Corporate Finance” by Richard A. Brealey, Stewart C. Myers, and Franklin Allen.
“Financial Management: Theory & Practice” by Eugene F. Brigham and Michael C. Ehrhardt.

Real Estate Basics: Per Annum Fundamentals Quiz

### What does "per annum" mean? - [x] By the year - [ ] By the month - [ ] By the day - [ ] Twice a year > **Explanation:** "Per annum" is Latin for "by the year" and indicates an annual rate or occurrence. ### Which of the following most accurately describes the per annum rate? - [ ] Occurs every six months - [ ] Daily calculation of an amount - [x] Annually occurring or calculated rate - [ ] Twice the annual frequency > **Explanation:** A per annum rate is calculated or occurs yearly. ### If an insurance premium is $1,200 per annum, how much needs to be paid each year? - [x] $1,200 - [ ] $100 - [ ] $600 - [ ] $3,600 > **Explanation:** A per annum payment of $1,200 indicates the full yearly cost. ### What does an annual interest rate of 6% per annum imply? - [ ] The interest is compounded monthly - [ ] The interest is charged every six months - [x] The interest rate applies yearly - [ ] The interest is compounded daily > **Explanation:** A 6% per annum rate indicates that the interest rate applies annually. ### How would you express an employee's annual salary of $50,000 in per annum terms? - [ ] $4,166.67 per month - [ ] $12,500 per quarter - [ ] $25,000 semi-annually - [x] $50,000 per annum > **Explanation:** $50,000 per annum indicates an annual salary. ### What abbreviation is commonly used for "per annum"? - [x] P.A. - [ ] P.Y. - [ ] A.P. - [ ] P.D. > **Explanation:** The abbreviation "P.A." stands for "per annum." ### How is "per annum" usually used in context? - [ ] To describe daily rates - [x] To describe yearly rates or payments - [ ] To describe monthly rates - [ ] To describe weekly payments > **Explanation:** "Per annum" is used to refer to yearly rates or payments. ### When applied to a financial rate, what does "per annum" typically express? - [ ] Monthly interest - [ ] Total interest payable each month - [x] Annual interest or payment rate - [ ] Weekly repayment > **Explanation:** In finance, "per annum" is used to express the annual interest or payment rate. ### If something is described as recurring "per annum," how frequently does it occur? - [x] Once a year - [ ] Twice a year - [ ] Monthly - [ ] Daily > **Explanation:** "Per annum" indicates an annual or yearly occurrence. ### Is "per annum" applicable for describing daily rental rates? - [ ] Yes, it is perfect for this use - [ ] It can be used interchangeably - [x] No, "per annum" is inappropriate for daily rates - [ ] Sometimes, but it's not common > **Explanation:** "Per annum" is not suitable for daily rates; "per diem" would be appropriate for daily allowances.