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Principal

• (1) The total amount of money being borrowed or lent. (2) The party affected by agent decisions in a principal-agent relationship.

• The amount of money on which interest is paid.

• (1) The face amount or par value of a debt security. (2) One who acts as a dealer buying and selling for his own account.

• See Par.

 
 Embedded terms in definition
 Agent
Dealer
Debt security
Debt
Interest
Par value
Par
Security
 
 Referenced Terms
 Accrual bond: A bond on which interest accrues, but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining Principal of the bond and is paid at maturity.

 Agency costs: The incremental costs of having an agent make decisions for a Principal.Costs borne by shareholders to prevent or minimize agency problems and to contribute to the maximization of the owners' wealth. They include monitoring and bonding expenditures, opportunity costs, and structuring expenditures.

 Agency pass throughs: Mortgage pass-through securities whose Principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association ( Ginnie Mae ), Federal Home Loan Mortgage Corporation ( Freddie Mac ) and Federal National Mortgage Association ( Fannie Mae ).

 Agency theory: The analysis of Principal-agent relationships, wherein one person, an agent, acts on behalf of anther person, a principal.

 Amortization: The systematic expensing of a portion of the cost of a fixed asset against sales revenue.(1) The paying off of debt in regular installments over a period of time. (2) The deduction of certain capital expenses over a specific period of time.The repayment of a loan by installments.Is the periodic pay down of Principal. This is a common feature of most mortgages. Amortize also refers to the accounting write down or reduction in an intangible asset. This creates a charge against income. Amortization can also refer to the reduction in the cost basis of a bond purchased at a premium to par. Sometimes, amortization is used as a synonym for depreciation or other write down of an asset or liability. In the later capacity it tends to apply to intangible assets. See Interest Impact on Installment to Amortize or Amortization.The process of reducing a debt through installment payments of Principal and interest.

 
 Related Terms
 

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