The price paid for obtaining, or price received for providing, money or goods in a credit transaction, calculated as a fraction of the amount of value of what was borrowed.
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds.
When money is borrowed, interest is typically paid to the lender as a percentage of the principal, the amount owed to the lender. The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year) is called the interest rate.
Principal At Maturity
Nominal, principal, par, or face amount —is the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term. Some structured bonds can have a redemption amount which is different from the face amount and can be linked to performance of particular assets such as a stock or commodity index, foreign exchange rate, or a fund. This can result in an investor receiving less or more than his original investment at maturity.
The issuer has to repay the nominal amount on the maturity date (which can be any length of time). As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date. The maturity can be any length of time, although debt securities with a term of less than one year are generally
Accounting for Interest Earned and Principal at Maturity
During the life of the debt held to maturity, the company holding the debt will record the interest received at the designated payment dates.