Web www.software-risk.co.uk

Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

Related Articles
Stock dividend
Premium
Payment date
Payment
Noncumulative
Low grade
Low balance method
Limitation on conversion

Similar Areas

Finance Items

Selected Books

Keywords

Accrued interest

interest

convertible securities

payment

bond

fixed-income security

coupon rate

coupon period

bondholder