Investopedia

Continue to Site »

Accumulation Bond

Filed Under » ,
Dictionary Says

Definition of 'Accumulation Bond'

A bond issued at an original issue discount (OID). This means that the interest accumulates but is not paid until maturity; there are no semi-annual coupon payments as with most bonds.

These bonds are also referred to as "accrual bonds."

Investopedia Says

Investopedia explains 'Accumulation Bond'

As accumulation bonds are always sold at an OID, they are always sold below face value, and the IRS considers the OID a form of interest. Even though the bondholder is not receiving coupon payments, the interest on the bond is still accumulating and must be reported as interest income on the bondholder's tax return each year.

Some investors like to use accumulation bonds in their financial plans, as they know the exact amount they will receive at a future point in time when the bond matures, even though they don't receive interim cash flows.

Articles Of Interest

  1.

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.

  2. How does the money from the interest on my bond get to me?

    When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face value of the bond (the amount you initially invested), which is typically ...

  3. Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.

  4. What constitutes an "intention to call a debt instrument before maturity" for tax purposes?

    When a bond is sold for a capital gain, the seller will face taxation on the profit. The profit from the sale will either be treated a capital gain or ordinary income depending on the nature ...

  5. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  6. Climb The Bond Ladder To Higher Income

    Whether it's learning how to ladder bonds or finding alternatives, investors seeking better returns need to be more active.

  7. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  8. Guide To Embedded Options In Bonds

    Investors should be aware of embedded options that may be available in certain securities as these options may affect the value of the security.

  9. Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.

  10. Helping Parents Advise Underage Investors

    This article looks at options for teenagers to prepare for their financial futures.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  2. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  3. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  4. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  5. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  6. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.
Trading Center