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KembaraXtra- Financial Terms- accrued interest refers to the amount of interest earned on a bond or other security since the last interest payment date but not yet received.
Interest on many securities accumulates daily even though payments are only made periodically, such as every six months or annually.
When a bond is bought or sold between interest payment dates, accrued interest becomes important because the seller has earned interest for the period before the sale.
The buyer normally compensates the seller for this earned but unpaid interest as part of the transaction price. This ensures fair allocation of investment income.
Accrued interest is closely connected with the accrued income scheme and plays an important role in bond markets, investment accounting, and taxation.
Interest on many securities accumulates daily even though payments are only made periodically, such as every six months or annually.
When a bond is bought or sold between interest payment dates, accrued interest becomes important because the seller has earned interest for the period before the sale.
The buyer normally compensates the seller for this earned but unpaid interest as part of the transaction price. This ensures fair allocation of investment income.
Accrued interest is closely connected with the accrued income scheme and plays an important role in bond markets, investment accounting, and taxation.
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