Principal

In commercial arithmetic, the principal is the initial amount of money borrowed from a lender or invested in a business or bank account, before any interest is added or calculated.

Example

If you borrow $50,000$ TZS from a bank at an interest rate of $10\%$ per year, the $50,000$ TZS is the principal ($P$). The simple interest after one year is calculated as $I = \frac{P \times R \times T}{100} = \frac{50000 \times 10 \times 1}{100} = 5,000$ TZS.

See Also

• Simple Interest
• Compound Interest
• Rate