Accrued Interest -- Interest accrued in the interval between the last disbursement and the sale of a bond or other fixed-income asset. Worked out by multiplying the coupon rate by the number of days that have passed since the most recent payment. When a bond is sold, the buyer pays the seller the sum of the bond price and accrued interest.
Although curtailed by the 1984 Tax Act, accrued interest deals are to be seen in a real estate Limited Partnership when the owner of a piece of property disposes of it through a lump sum cash payment for part of the value and through a second mortgage for the remainder. In case the mortgage payments exceed the rental income from the property, the seller may consent to wait till the asset is sold to someone else, interest being accumulated in the meantime.
Accrued Interest -- interest that has been earned but which has not been paid or credited since the last time that interest was paid.
Accrued interest -- The amount of interest not yet payable
that has accrued at a given time after the last regular payment.
Instalments of interest due and unpaid are accumulated
interest, as distinguished from accrued interest.
About the author
Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".
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