ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is Principal? Principal is most commonly used to refer to the original sum of money borrowed in a loan or put into an investment.

Detailed explanation-2: -The principal–the money that you borrow. The interest–this is like paying rent on the money you borrow.

Detailed explanation-3: -Principal is the money that you originally agreed to pay back. Interest is the cost of borrowing the principal. Generally, any payment made on an auto loan will be applied first to any fees that are due (for example, late fees).

Detailed explanation-4: -The formula to calculate simple interest is: principal x rate x time = interest (with time being the number of days borrowed divided by the number of days in a year). If you borrow a $2, 500.00 loan with an interest rate of 5.00% for a period of one year, the interest you owe will be $125.00 ($2, 500.00 x . 05 x 1).

Detailed explanation-5: -The principal is the amount you borrowed and have to pay back, and interest is what the. For most borrowers, the total monthly payment you send to your mortgage company includes other things, such as homeowners insurance and taxes that may be held in an escrow account.