Accrued interest
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
The portion of a bond's next coupon payment that has accrued to the seller since the last coupon date.
Accrued interest in plain English
Bonds are IOUs that pay interest (called a "coupon") on set dates, usually twice a year. If you sell your bond halfway between those payment dates, it wouldn't be fair for the buyer to pocket the whole next coupon — you earned half of it just by holding the bond. "Accrued interest" is that earned-but-not-yet-paid slice, and the buyer pays it to you on top of the bond's price so everyone gets exactly the interest they're owed. It's like splitting a monthly streaming subscription with a roommate who moves in mid-month — they only owe you for the days they'll actually use it.
Practice Accrued interest
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