Question

What does $ 12\% $ per annum mean.

Answer 1

Hint: Here we are given a rate of interest in percentage which is calculated per annum. Annum is Latin term which means annually or per each year. Percentage is the number or ratio expressed as a fraction of hundred. Fractions are the part of the whole which represents any number of equal parts and it describes the part from a certain size and it is the number expressed in the form of numerator upon the denominator. Know the difference between the fraction and the percentage and apply accordingly.

Complete step by step solution:
Here we are given a percentage per annum, so to understand we will take one example.
Let us suppose that you borrow money Rs. 1000 from the bank at the rate of $ 12\% $ per annum, so you have to pay the interest rate for using the bank’s money.
P is the principal amount, R is the rate of interest, T is the term period and I is the interest.
Here,
  $
  P = 1000\;{\text{Rs}}{\text{.}} \\
  {\text{R = 12 % }} \\
  {\text{T = 1 year}} \;
  $
Where interest is calculated by using the formula,
 $ I = PRT $
Placing the values in the formula we get,
 $ I = 1000 \times \dfrac{{12}}{{100}} \times 1 $
Simplification implies
 $ I = 120{\text{ Rs}}{\text{.}} $
 $ A = P + I $
 $
  A = 1000 + 120 \\
  A = 1120{\text{ Rs}}{\text{.}} \;
  $
So, at the end of year amount (A) payable will be Rs. $ 1120 $

Note: Be careful while simplifying equations and always remember when its percentage is with respect to hundred. While simplification always convert the percentage in the form of fraction and then try to find out the common factors from the numerator and the denominator since the common factors from the numerator and the denominator cancel each other.