Principal
The face amount a bond issuer borrows and must repay at maturity, on which interest is calculated.
Formula
Coupon Payment = Principal x Coupon Rate / Number of Payments per Year
Unit
₹
In depth
The principal, also called face value or par value, is fixed at issue and does not change with the bond's market price — a bond bought at ₹950 still repays ₹1,000 at maturity, and one bought at ₹1,080 still repays ₹1,000. That difference between purchase price and principal is part of the return and is what makes yield differ from coupon. Interest is always computed on the principal, never on the market price, which is why a bond bought at a discount has a current yield above its coupon rate. For inflation-indexed bonds the principal itself adjusts, which is the exception that proves the rule.
Worked example
A ₹1,000 principal bond with an 8% coupon pays ₹80 a year regardless of whether the bond trades at ₹880 or ₹1,120. At ₹880 the current yield is 80 / 880 = 9.1%; at ₹1,120 it is 7.1%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Principal” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.