What is the principal value? How to calculate the principal value?

2023-06-05
Summary:

Principal refers to the initial amount of investment or borrowing, which can also be understood as the initial funds. In investment, the principal is the initial capital invested by the investor, while in lending, the principal is the money that the borrower initially borrowed from the lending institution or individual.

Principal refers to the initial amount of investment or borrowing, which can also be understood as the initial funds. In investment, the principal is the initial capital invested by the investor, while in lending, the principal is the money that the borrower initially borrowed from the lending institution or individual. Usually, borrowers need to repay the principal and interest according to the agreement, while investors expect to receive returns through investment, including protection and appreciation of the principal.

The formula for calculating principal=interest ÷ time ÷ interest rate.

The principal refers to the original amount of the loan, deposit, or investment before calculating interest. Interest is the usage fee of currency over a certain period of time, which refers to the remuneration received by the currency holder (creditor) from the borrower (debtor) for lending currency or currency capital. The interest rate refers to the ratio of the amount of interest due during each period to the face value of the borrowed, deposited, or borrowed amount (referred to as the total principal amount).

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