In finance and banking, interest signifies the expense of borrowing funds or the profit generated from savings or investments. It is quantified as a rate, representing a percentage of the principal sum. This rate is typically quoted annually, leading to common phrases like 'annual interest rate' or 'per annum'. For instance, a 5% annual interest rate on a savings deposit means a 5% return on the principal each year. Conversely, loan recipients incur annual interest charges at the predetermined rate. Expressing the interest rate annually simplifies the comparison of financial products and clarifies the yearly cost or yield. Consequently, interest is fundamentally expressed as a Rate of Interest per annum.