Final answer:
The principal of a bond is the face amount of the bond that will be repaid at maturity, not the interest rate, nor the identities of the buyer or seller of the bond. The correct option is c.
Step-by-step explanation:
The principal of a bond refers to the face amount of the bond that will be repaid to the investor at the maturity date. This is distinct from the interest rate or coupon rate, which is the rate of return the bond pays periodically to the bondholder, typically on a semi-annual basis. The principal is essentially what the borrower, such as a corporation or government, owes the investor who bought the bond. When the bond reaches its maturity date, the issuer is obligated to pay back this principal amount along with the final interest payment.
The face value of the bond is not necessarily the same as its present value, which can fluctuate based on market interest rates. The present value is the maximum amount a buyer would be willing to pay for the bond. Thus, the principal of a bond can be considered the original investment amount before any interest is earned through coupon payments over the life of the bond.
In financial terms, the principal of a bond refers to the face amount of the bond that will be paid back at maturity. It is the amount that the borrower agrees to pay the investor when the bond reaches its maturity date. This principal amount is usually repaid along with the last interest payment of the bond.