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Definition
Per annum (Latin for “by the year”) is the convention that interest rates are expressed as an annual figure. A rate quoted per month or per week must be annualised — and if it compounds, annualised to the effective annual rate — before it can be compared with a p.a. quote. A “2% per month” facility is roughly 26.8% EAR, not 2%.
In plain terms
It is the yardstick that lets you line rates up side by side. Watch for costs quoted per month or per week — they are much bigger per year.
Why it matters for your company
Always convert any sub-annual rate to a per-annum (ideally effective) figure before comparing. See effective annual rate and nominal rate.
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