Accrued Interest

A loan over time but not yet paid or collected by the borrower or lender is referred to as accrued interest.

A bond is a debt obligation in which the lender, or owner, is compensated with interest payments. The coupons for this interest are usually paid every six months. Bond ownership is readily transferable between investors throughout this time.

The ownership of interest payments becomes a difficulty at that point. The investor who sold the bond must be paid for the time they possessed it, even though the owner of the record is the only one who may collect the coupon payment.

In other words, the interest accumulated before the transaction must be paid to the former owner. The money loaned to the borrower, or issuer, of a bond is the principle, and the interest paid on a bond is compensation for that money. At bond maturity, the principal is returned to the bondholder. Whoever is the legal owner of the bond at the time of maturity will get the principal amount, just like in the case of the coupon or interest payment.

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