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Principal Amount |
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Definition of Principal AmountPrincipal AmountGenerally, refers to the face value of a debt. Principal amountThe face amount of debt; the amount borrowed or lent. Often called principal.
Related Terms:Notional principal amountIn an interest rate swap, the predetermined dollar principal on which the amortizationThis term has two quite different meanings. First, it may AmortizeTo liquidate on an instalment basis; an amortized loan is one on which the principal amount of the loan is repaid in instalments during the life of the loan. BondBonds are debt and are issued for a period of more than one year. The U.S. government, local BondUsually a fixed interest security under which the issuer contracts to pay the lender a fixed principal amount at a stated date in the future, and a series of interest payments, either semi-annually or annually. Interest payments may vary through the life of bond. Guaranteed investment contract (GIC)A pure investment product in which a life company agrees, for a Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Original face valueThe principal amount of the mortgage as of its issue date. Serial bondsCorporate bonds arranged so that specified principal amounts become due on specified dates. Generally Accepted Accounting Principals (GAAP)A technical accounting term that encompasses the Principal1) The total amount of money being borrowed or lent. PrincipalThe original amount loaned, which is repaid plus interest. See face value. PrincipalThe obligation due under a debt instrument exclusive of interest. Principal-agent relationshipA situation that can be modeled as one person, an agent, who acts on the behalf Principal of diversificationHighly diversified portfolios will have negligible unsystematic risk. In other Principal only (PO)A mortgage-backed security in which the holder receives only principal cash flows on Principal valueSee Par value. Remaining principal balanceThe amount of principal dollars remaining to be paid under the mortgage as of Value additivity principalPrevails when the value of a whole group of assets exactly equals the sum of the Accrual bondA bond on which interest accrues, but is not paid to the investor during the time of accrual. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each BondA long-term debt instrument in which the issuer (borrower) is Continuous CompoundingThe process of continuously adding interest to a principal plus Discrete CompoundingThe process of adding interest to a principal plus interest amount Effective Interest RateThe rate of interest actually earned on an investment. It is Graduated-payment mortgages (GPMs)A type of stepped-payment loan in which the borrower's payments MBS servicingThe requirement that the mortgage servicer maintain payment of the full amount of Negative amortizationA loan repayment schedule in which the outstanding principal balance of the loan Present ValueThe amount due on an obligation less any interest on that obligation that would simple interesta method of determining interest in which interest is earned only on the original investment (or principal) amount
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