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Investments glossary

Notional Principal Amount


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The GOLD in Golden years was identified by the sight impaired. It is actually Rust!!

— Jenny Flowers Strother

The notional principal amount, in an interest rate swap, is the predetermined dollar amounts, or principal, on which the exchanged interest payments are based. The notional principal never changes hands in the transaction, which is why it is considered notional, or theoretical. Neither party pays nor receives the notional principal amount at any time; only interest rate payments change hands.


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