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What Does "and Interest" Mean?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 July 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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"And interest" is a term that is often associated with identifying the amount of interest that has been accrued on a bond issue up to a certain date. Typically, the designation of this amount as a separate consideration from the par value of the bond is so investors can quickly and easily have some idea of the type of return that has been generated on the issue up to that point in time. In many instances, the total current value of the bond is presented as the asked price and interest, which simply means the price that the investor paid for the bond on the front end plus any interest that has been earned to date.

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Along with using the phrase "and interest" as a means of providing a more detailed breakdown on the return generated by a bond issue, the term may also be used in other settings as well. This includes debt obligations that accrue interest over a period of time. For example, if a borrower wishes to have a breakdown of the remaining balance due on a loan, the lender may choose to present this information by identifying the amount of the outstanding principle, which represents the portion of the funds loaned that still need to be repaid. Along with identifying the outstanding principle, the lender will then go on to identify the amount of interest that remains due on the loan. Adding the two figures together represents the total remaining amount to be paid, assuming that the debt is retired in accordance with the payment schedule agreed upon by the two parties.

Whether referring to the interest charged on a debt or the interest that is being generated by an investment of some type, the phrase "and interest" helps to identify what type of benefit the receiving party will eventually enjoy. In the case of a bond issue, periodically checking the amount of accrued interest can help to confirm that the anticipated return is still highly likely, a factor that can be especially important if the bond issue was structured with a floating rather than a fixed rate of interest. By ascertaining on an annual basis if the asked price and interest is standing in line with the investor’s projections, it is easier to decide whether to hold the bond for a little longer, or attempt to sell it for the asked price plus the current amount of interest that has accrued. While many investors hold bonds all the way to maturity, anticipated shifts in average interest rates may prompt an investor to sell for the asked price and interest accrued now, if that shift will adversely affect the floating rate applied to the bond over the next year or two, and invest that money in something with a fixed rate of return.

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