Die Heuning Pot Literature Guide
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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Accrued Interest

Definition:

Wesley owes money to Lenny. Lenny has lent Wesley a Baseball Bond* which requires payment on January 1 and July 1 each year. The bond yields 8% annually and is compounded semi-annually. So Wesley owes 4% twice a year. But Wesley is now wearing stripes (not a referee reference) and a court has ordered him to pay off the bond entirely as of April 1, no Foolin'. That's half way to the halfway point of the semiannual payment of the 8% Baseball Bond. So Wesley has accrued interest of 2% during those 90 days and will pay it off in cash, not cigarettes. For literally every day that ticks by, Wesley will owe Lenny interest on that bond, those bonds, in this bondage.

*There is no such thing as a Baseball Bond. There is, however, a Barry Bond, plural.

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