Listen to a Business English Dialogue About Principalamount face value
Molly: Hi Benjamin, do you know what principal amount or face value means in finance? It’s the initial amount of money invested or borrowed.
Benjamin: Oh, I see. So, it’s like the original sum before any interest or additional payments are added?
Molly: Exactly! Principal amount is essential for calculating interest and determining the total amount owed or earned.
Benjamin: That makes sense. Is principal amount used in different financial contexts?
Molly: Yes, it’s used in various situations, like loans, bonds, or investments, to denote the original amount of money involved.
Benjamin: Got it. So, in the context of bonds, the principal amount is the amount that will be repaid to the bondholder at maturity?
Molly: That’s correct. Bondholders receive the principal amount back when the bond reaches its maturity date.
Benjamin: Are there any factors that can affect the principal amount?
Molly: The principal amount can remain the same if it’s a fixed-rate investment, but it can change if there are adjustments or fluctuations in the market.
Benjamin: Thanks for explaining, Molly. Principal amount seems like a fundamental concept in finance.
Molly: You’re welcome, Benjamin. Understanding principal amount is crucial for managing finances and making informed investment decisions.