Question

What does$10$ percent per annum mean?

Answer 1

Rate of Interest:

1. The rate of interest per annum is the amount to be paid or received annually until the end of the maturity period.
2. The amount to be paid or received depends on whether the interest is simple or compound.
3. If it is simple interest, $\mathit{S}\mathit{I}\mathbf{=}\frac{\mathbf{P}\mathbf{R}\mathbf{T}}{\mathbf{100}}$, where $P$is the principal amount, $R$is the rate of interest, and $T$is the time period.
4. If the rate of interest is $10\%$p.a, $SI=\frac{P\times 10\times 1}{100}$i.e., $0.1P$
5. The simple interest to be paid or received annually is $10\%$of the principal amount in addition to the principal amount.
6. If the interest is compounded, the total amount to be paid or received is $\mathit{A}\mathbf{=}\mathit{P}{\left(1+\frac{R}{100}\right)}^{\mathbf{T}}$
7. If the rate of interest is $10\%$p.a, $A=P{\left(1+\frac{10}{100}\right)}^1$i.e., $1.1P$.

Hence the rate of interest on a deposit or loan per year is written as $10$ percent per annum.