What Does 7% Interest Per Annum Mean? Explanation & Examples

Learn what 7% interest per annum means and how it affects your investments with simple explanations and examples.

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7% interest per annum means that for every $100 you invest, you will earn $7 over the course of one year. This rate is applied to the principal amount annually, compounding the interest earned if not withdrawn. It's a way for your money to grow over time when deposited in a savings account, bond, or investment that offers this interest rate.

FAQs & Answers

  1. What does interest per annum mean? Interest per annum refers to the percentage of interest earned or paid on an investment or loan over the course of one year.
  2. How is 7% interest per annum calculated? 7% interest per annum means you earn $7 for every $100 invested annually, calculated based on the principal amount each year.
  3. What is the difference between simple and compound interest? Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any previously earned interest.

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