What is the term for the initial sum of money deposited or invested, excluding interest?

What is the term for the initial sum of money deposited or invested, excluding interest?

• A. Interest
• B. Principal
• C. Dividend
• D. Yield

Answer: (B)

The initial amount you deposit or invest, before any earnings are added, is the principal. It’s the baseline the interest is calculated on, and it remains the starting sum regardless of how much interest accumulates over time. For example, if you put in $5,000 and after a year you have $5,250, the $5,000 is the principal and the $250 is the interest earned. The other terms describe different ideas: interest is the money earned on top of the principal; a dividend is a payout from a company to shareholders; yield is a percentage rate of return. So the initial sum is principal.

The initial amount you deposit or invest, before any earnings are added, is the principal. It’s the baseline the interest is calculated on, and it remains the starting sum regardless of how much interest accumulates over time. For example, if you put in $5,000 and after a year you have $5,250, the $5,000 is the principal and the $250 is the interest earned. The other terms describe different ideas: interest is the money earned on top of the principal; a dividend is a payout from a company to shareholders; yield is a percentage rate of return. So the initial sum is principal.