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Definition of Principal
1) The total amount of money being borrowed or lent.
The original amount loaned, which is repaid plus interest. See face value.
The obligation due under a debt instrument exclusive of interest.
A technical accounting term that encompasses the
In an interest rate swap, the predetermined dollar principal on which the
A situation that can be modeled as one person, an agent, who acts on the behalf
The face amount of debt; the amount borrowed or lent. Often called principal.
Generally, refers to the face value of a debt.
Highly diversified portfolios will have negligible unsystematic risk. In other
A mortgage-backed security in which the holder receives only principal cash flows on
See Par value.
The amount of principal dollars remaining to be paid under the mortgage as of
Prevails when the value of a whole group of assets exactly equals the sum of the
A bond on which interest accrues, but is not paid to the investor during the time of accrual.
The incremental costs of having an agent make decisions for a principal.
Mortgage pass-through securities whose principal and interest payments are
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
The decision-maker in a principal-agent relationship.
This term has two quite different meanings. First, it may
The reduction of debt by regular payments of interest and principal sufficient to pay off a loan by maturity.
Amortization (Credit Insurance)
Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.
A schedule that shows precisely how a loan will be repaid. The schedule gives the required payment on each specific date and shows how much of it constitutes interest and how much constitutes repayments of principal.
To 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.
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
Methods of financing in which lenders and equity investors look principally to the
Also referred to as the weighted-average life (WAL). The average number of years that each
A plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor
Any large principal payment due at maturity for a bond or loan with or without a a sinking
Bonds are debt and are issued for a period of more than one year. The U.S. government, local
A long-term debt instrument in which the issuer (borrower) is
Usually 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.
Bond whose principal repayment is linked to the price of another security. The bonds are
Mortgages in which monthly payments consist of principal and interest, with portions of these
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that
A loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest.
Interest paid on previously earned interest as well as on the principal.
Interest paid on principal and on interest earned in previous
a method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest
Interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.
System whereby customers make payments to a regional collection center which transfers funds to
The process of continuously adding interest to a principal plus
Corporate financial management
The application of financial principals within a corporation to create and
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Reducing the principal and/or interest payments on LDC loans.
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Failure to make timely payment of interest or principal on a debt security or to otherwise comply
The failure by a debtor to make a principal or interest payment in a timely
Failure of a debtor to make timely payments of principal and interest as they become due.
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
Debt sold for less than its principal value. If a discount bond pays no interest, it is called a
The process of adding interest to a principal plus interest amount
Eurobonds that pay coupon interest in one currency but pay the principal in a different
EBDDT - Earnings before depreciation and deferred taxes
This measure is used principally by
Effective Interest Rate
The rate of interest actually earned on an investment. It is
One of two principal clearing systems in the Eurobond market. It began operations in 1968, is
The risk that the ability of an issuer to make interest and principal payments will change because
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
The maturity value of a security. Also known as par value,
The payoff value of a bond upon maturity. Also called par value. See principal.
Type of financial service whereby a firm sells or transfers title to its accounts receivable to a factoring company, which then acts as principal, not as agent.
1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
Fully modified pass-throughs
Agency pass-throughs that guarantee the timely payment of both interest and
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
Mortgage-backed securities (MBS) on which registered holders receive separate principal and
Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and
Government National Mortgage Association (Ginnie Mae)
A wholly owned U.S. government corporation
Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period.
Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
Interest-only strip (IO)
A security based solely on the interest payments form a pool of mortgages, Treasury
Contractual debt payments based on the coupon rate of interest and the principal amount.
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
Letter of credit (L/C)
A form of guarantee of payment issued by a bank used to guarantee the payment of
The characteristic of the scheduled principal and interest payments due under a mortgage such that
Loan amortization schedule
The schedule for repaying the interest and principal on a loan.
For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the
The requirement that the mortgage servicer maintain payment of the full amount of
Agency pass-throughs that guarantee (1) timely interest payments and (2) principal
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
A loan repayment schedule in which the outstanding principal balance of the loan
Net Cash after Operations
Cash flow available for debt service—the payment of interest and principal on loans. Generally calculated as cash provided by operating activities before interest
Original face value
The principal amount of the mortgage as of its issue date.
A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
Planned amortization class CMO
1) One class of CMO that carries the most stable cash flows and the
The outstanding principal balance divided by the original principal balance with the result
Payments made in excess of scheduled mortgage principal repayments.
The amount due on an obligation less any interest on that obligation that would
A prepayment model based on an assumed rate of prepayment each month of the then unpaid principal
A bond that will make only one payment of principal and interest. Also called a zerocoupon
Rate of interest
The rate, as a proportion of the principal, at which interest is computed.
1) Date by which a shareholder must officially own shares in order to be entitled to a dividend.
Regulatory accounting procedures
Accounting principals required by the FHLB that allow S&Ls to elect
One who receives the principal of a trust when it is dissolved.
The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.
return of capital
the recovery of the original investment (or principal) in a project
Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the
Corporate bonds arranged so that specified principal amounts become due on specified dates.
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