Help & FAQs

What does Accrued Interest mean when purchasing a bond?

Accrued Interest is the amount of interest earned on a debt and owed to the owner, but has not yet been collected. Interest accumulates from the date a loan is issued. The bond owner (the lender of the debt) receives compensation in the form of interest payments (coupons) and these are made intermittently to the owner.

In between the periods of time when the interest payments (coupons) are made, the bond can be sold and purchased by another. The seller of the bond will be owed any interest payments for the period of time for which he/she held the bond. The Accrued Interest due to the seller is applied at the same time of the new owner purchasing the bond.

Submitted on 19th Aug 2019

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