Advanced English Dialogue for Business – Accrued interest

Listen to a Business English Dialogue About Accrued interest

Grace: Hey Chloe, do you know what accrued interest is?

Chloe: Hi Grace! Yes, accrued interest is the interest that accumulates on a financial instrument between interest payment dates.

Grace: That’s right. It’s important to keep track of accrued interest, especially when buying or selling bonds or other interest-bearing assets.

Chloe: Absolutely. Accrued interest can affect the final price of a bond transaction and is typically settled between the buyer and seller at the time of trade.

Grace: Right. And it’s calculated based on the time elapsed since the last interest payment and the interest rate of the bond.

Chloe: Exactly. So, even though the interest payment hasn’t been made yet, the accrued interest represents the amount that’s owed up to that point.

Grace: Right. And when buying a bond, the buyer typically pays the seller the accrued interest in addition to the purchase price.

Chloe: That’s correct. And when selling a bond, the seller is entitled to receive the accrued interest up to the settlement date.

Grace: Exactly. Accrued interest ensures that both the buyer and seller are compensated fairly for the interest earned during the time the bond was held.

Chloe: Right. It’s an important concept to understand, especially for investors trading bonds in the secondary market.

Grace: Absolutely. Being aware of accrued interest helps investors make informed decisions and ensures transparency in bond transactions.

Chloe: Indeed. It’s just one of the many factors to consider when buying or selling fixed-income securities.