Printer Friendly
The Free Dictionary
966,703,017 visitors served.
?
Dictionary/
thesaurus
Medical
dictionary
Legal
dictionary
Financial
dictionary
Acronyms
 
Idioms
Encyclopedia
Wikipedia
encyclopedia
?

accrued interest

   Also found in: Dictionary/thesaurus, Wikipedia 0.04 sec.
Accrued Interest
The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date.

There are two methods for calculating accrued interest:
1) 360-day year method, used for corporate and municipal bonds.
2) 365-day year method, used for government bonds.

Notes:
Accrued interest is added to the contract price of a bond transaction. Essentially accrued interest has been earned since the last coupon payment - but since the bond hasn't expired or the next payment is not yet due, the owner of the bond hasn't officially received the money. If he or she sells the bond, accrued interest is added to the sale price.


Accrued interest
Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)

accrued interest
Interest owed but not yet paid. Accrued interest is listed as a liability on corporate balance sheets. It is also added to the price at which bonds are traded. For example, if a 12% coupon bond is trading at $950 and the last record date for an interest payment was two months ago, the buyer must pay the seller $20 (two months' interest at 1% per month on $1,000 principal) in accrued interest in addition to the quoted price. This additional expense will be recovered when the new owner receives six months' interest after holding the bond only four months.

?Page tools
Printer friendly
Cite / link
Email
Feedback
Add definition
? Mentioned in ? References in periodicals archive
 
The amount of the loans and all accrued interest were recorded on a note on January 1, 1994.
The first situation involves untaxed accrued interest on Series E and EE savings bonds owned by a deceased taxpayer.
The additional shares and accrued interest will be issued and paid as an inducement to these holders to convert the Notes.
 
Financial browser? ? Full browser
 
 
Financial Dictionary
?

Disclaimer | Privacy policy | Feedback | Copyright © 2008 Farlex, Inc.
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Terms of Use.