Accrued Interest Definition

What is Accrued Interest?

Accrued interest builds up over time on interest-bearing assets such as bonds, loans, or fixed-income securities. It represents the portion of interest earned since the last payment date.

In trading and investing, accrued interest is often included in the price of bonds when they are bought or sold between interest payment periods.

Understanding accrued interest is important for accurately calculating returns and transaction costs.

Example of Accrued Interest

If a bond pays interest every six months, the interest earned daily between payment dates is considered accrued interest until it is paid out.