Word: Principal Sum
Definition:
The "principal sum" refers to the original amount of money that is invested or borrowed, not including any interest or additional earnings. It is the main amount of capital, distinct from any extra money earned or charged on it.
Usage Instructions:
You typically use "principal sum" in financial contexts, such as when discussing loans, investments, or savings. It's important to distinguish it from interest or profits, which are the additional amounts earned on top of the principal.
Example Sentence:
"When she took out a loan, she had to repay the principal sum along with the interest accrued over the years."
Advanced Usage:
In more complex financial discussions, you might encounter terms like "amortization," which refers to the process of gradually paying off a loan's principal sum over time through regular payments. Understanding how the principal sum interacts with interest rates is crucial for effective financial planning.
Word Variants:
- Principal (noun): Refers to the main amount of money in various contexts. - Principal (adjective): Used to describe something that is primary or most important (e.g., principal amount, principal borrower).
Different Meaning:
- "Principal" can also refer to the head of a school or organization, unrelated to financial contexts. For example, "The principal of the school announced new policies."
Synonyms:
- Capital - Original amount - Base amount
Idioms and Phrasal Verbs:
There aren’t specific idioms or phrasal verbs that directly include "principal sum," but you may encounter phrases like "pay off the principal," which means to pay back the original amount of a loan.
Summary:
In summary, the principal sum is the starting amount of money involved in a financial transaction, crucial for understanding loans, investments, and savings.