And Interest

  

"And interest" is a reminder used by a bond salespeople when they quote the price of a bond. This little hinty phrase is deployed to inform the buyer that they will pay for the basic price of the bond, but the price will also include any accrued interest.

Let’s say you are being quoted a price of a bond at $200 “and interest,” and the bond issuer makes annual interest payments of $12. If you buy the bond in March and one quarter of the year has passed since the bond paid any interest, the accrued interest you can expect to pay for and receive is $9, nine months from now.

Related or Semi-related Video

Finance: What is "when-issued"?12 Views

00:00

finance a la shmoop what is when issued all right well it's a trading condition [Definition of when-issued]

00:08

that applies to spin-offs or other structural changes in companies such

00:12

that a new thing or entity is created which will have its own separate set of

00:18

trading parameters and rules and elements and yeah okay well this one's [Woman looking confused]

00:24

just easier with an example

00:27

shmoop enterprises global or shmeg creators of the finest hand cream soap [Bottle of Shmeg hand cream is taken off a shelf]

00:33

jokes on the planet decides to spin off its European business as a separate

00:39

company based in Paris we like the food and the tiny dogs and the arrogance and [Woman sat with a dog on her lap at a picnic table with a plate of food]

00:44

the armpit hair so we here at shmoop central declare that all shareholders of

00:50

SHM egg will get 0.35 shares of shmoo or a new company to be spun off of the [Shmeur stock being given to to Shmeg]

00:56

parent that new company will sell the same products as sh meg make them the

01:00

same way albeit with more european union labor and sell them only in Europe and [Guy working in a warehouse wearing a beret]

01:05

we mumbled that this notion makes sense because Europe is so protectionist

01:10

against them damn foreigners like us trying to sell anything into the [Definition of protectionist]

01:14

continent yeah they make us hire their labor first we're gonna sell stuff to

01:18

them and it's hard to sell anything into the continent and while we really try [Woman begging European businessmen]

01:23

hard to be incontinent ok the spin-off of shmore from Shmeg will officially [Newspaper article about the spinoff]

01:28

happen on May 4th our favorite day of the year and no it's not Bastille Day

01:32

but this security which will actually be trading on May 4th will begin trading on [May 4th highlighted on a calendar]

01:38

February 2nd as quote when issued unquote well why are securities kind of

01:44

traded here before they are actually traded like when issued is a kind of [3 zombies in front of a burnt down city]

01:49

zombie apocalypse derivative of an actual security being traded so like why

01:54

do it well in large part because when spin-offs like this happen there is an

01:58

unproven market with ambiguous market demand and appetite for those securities

02:03

maybe the Europeans are still angry we didn't enter the big one sooner and help [List of grudges against the US]

02:08

save them from the Nazis maybe they don't like Jack's secret sauce well [Pot of sauce appears next to a burger]

02:12

maybe just don't like our president and like

02:15

who doesn't like Oprah so what are they thinking anyway well but whatever the [Oprah giving a speech]

02:19

ability to kind of sort of test the market in the form of a when issued

02:23

security is a dandy ingredient to smooth friction sometimes a trust at big local [Pan of vegetables with when-issued stock]

02:28

partners might be brought in to commit to buying say 10 percent of a given when

02:32

issued security at a set price to hopefully stabilize a very uncertain [The big local partner looks excited]

02:37

market place and make it certain that when issued transactions that won't [Shmeg stock chart going up and down]

02:41

crater the parent company stock when it then comes time to actually begin

02:46

trading in February as when issued well the people who really want shmore can't [Big line of people]

02:50

rush to the head of the line so may the shmore be with you

Up Next

Finance: What is Bond Amortization?
7 Views

What is Bond Amortization? Bond amortization is simply the spreading out of the cost of the bond over time. Bonds have amortization schedules and t...

Finance: What are the Different Types of Bonds?
424 Views

What are the different types of bonds? Well, a mortgage is the biggie. Then there are government bonds, which are at the bottom of the risk ladder....

Finance: What are Government Bonds?
52 Views

What are government bonds? Uncle Sam needs dough. He sells bonds in the form of T-Bills, T-Notes, Treasury paper of all flavors. His credo? The cre...

Finance: What is a Muni Bond?
24 Views

What is a muni bond? Muni bonds are bonds issued by the government. They are used to raise the money required to pay for government responsibilitie...

Find other enlightening terms in Shmoop Finance Genius Bar(f)