accrued interest

Definitions (2)

1. Interest that is due on a bond or other fixed income security since the last interest payment was made. This often occurs for bonds purchased on the secondary market, since bonds usually pay interest every six months, but the interest is accrued by the bondholders on a day-to-day basis. When a bond is sold, the buyer pays the seller the market price plus the accrued interest, for which the buyer will be reimbursed when the issuer pays next pays interest. Accrued interest is calculated on a 30-day month/360-day year for corporate bonds and municipal bonds, and on actual-calendar-days for Government bonds.
Income bonds and bonds in default trade without accrued interest. When calculating accrued interest on a bond that is being sold, it is conventional to consider the time period from the most recent payment up to, but not including, the date on which the bond sale is settled.
2. Interest that a company owes, a current liability on the balance sheet.

Use accrued interest in a sentence

You should try and find a way to use your accrued interest to make some more money for you in the future.l

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The accrued interest was very high and people were always wondering what we were doing and how we were gonna pay.

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I purchased a series of corporate bonds for my retirement account in part because those bonds had a significant amount of accrued interest that would be profitable.

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