Consumer Mathematics: Financial Management
Principal
The original sum of money invested or borrowed, before any interest.
| English | Principal |
|---|---|
| Bahasa Melayu | Prinsipal |
| 中文 | 本金 |
How it is used
A student borrows RM3,000 to buy a laptop. This RM3,000 is the principal; when the loan charges 6% simple interest for 2 years, the interest I = 3000 × 0.06 × 2 = RM360 is calculated on this principal.
Where it shows up in SPM
In Financial Management, the principal is the P in I = Prt and in P(1 + r)ⁿ. Paper 1 and Paper 2 questions may give it directly, or ask you to find it by rearranging a formula when the interest or maturity value is known.
Don't confuse it with
Open the chapter: Consumer Mathematics: Financial Management →
Frequently asked questions
Is the principal the same for a loan and for savings?
The idea is the same: it is the original amount before interest. For savings it is what you deposit; for a loan it is what you borrow.
Interest is then charged on, or earned from, that starting principal.
How do I find the principal if I only know the interest?
Rearrange I = Prt to P = I ÷ (rt). If RM360 interest comes from 6% over 2 years, then P = 360 ÷ (0.06 × 2) = 360 ÷ 0.12 = RM3,000, which is the principal.