Final answer:
The correct sentence is 'The principal of the school lived by one principle: always do your best,' as it correctly uses 'principal' to denote the head of the school and 'principle' to refer to a fundamental truth or rule of conduct.
Step-by-step explanation:
The sentence with the correct usage among the provided options is 'The principal of the school lived by one principle: always do your best.' In this sentence, 'principal' correctly refers to the head of the school, while 'principle' is correctly used to denote a fundamental truth or proposition that serves as the foundation for a system of belief or behavior, in this case, the belief in always doing your best.
The words principal and principle are often confused because they are homophones, meaning they are pronounced similarly but have different meanings. It is important to choose the correct one based on the context. In the context provided, the school leader is bound by a guiding rule or a 'principle' which is a standard or rule of personal conduct.