What is 'Gross Interest'
Gross interest is the annual rate of interest to be paid on an investment, security, or deposit account before taxes or other charges are deducted. Gross interest is expressed as a percentage and is the opposite of net interest, which is the rate of interest after taxes are applied.
BREAKING DOWN 'Gross Interest'
When an individual deposits money in his bank account, the bank pays interest on the funds to the accountholder to compensate him for the deposit, which is used to lend money to individual and corporate borrowers. The interest paid may be deposited in the entity’s account monthly, quarterly, or annually, depending on the financial institution or account type. The interest is simply referred to as a gross interest because it does not factor in taxes, which also impacts the interest earnings. For example, if you had $3,000 in a savings account that earns 2% interest, charged on a yearly basis, the quoted 2% is the gross interest which would pay $60 at the end of the year.
However, the gross interest does not take into account other items such as taxes, fees, and other charges which may apply to the investment or account. After these costs are taken into account and deducted from the gross interest earned, the accountholder actually walks away with less. Following from our example above, if the monthly fee on the savings account is $5 and you were taxed 35%, taxes due would be would be $21 (calculated as 35% multiplied by $60) and the net interest earned would be calculated as $60  $21  $5 = $34, or 1.13%, which is less than the 2% gross interest.
Gross interest is simply the pure interest amount paid by a debtor to a creditor. Concerning bonds, the interest income bondholders receive from their investment, which will be subject to further taxes, represents gross interest. For example, assume a bond investor purchases a $1,000 par value corporate bond with a coupon rate of 3% payable annually and maturity date of five years. The bond issuer will periodically pay the bondholder a fixed interest of 3% x $1,000 = $30 for the duration of the bond’s life. The fixed coupon rate is the gross interest. However, at the end of the year, the interest earned on the corporate bond will be taxed by the government. Therefore, the bondholder’s effective net yield will be less than 3%.
The net interest is calculated from the gross interest after other fees and costs are deducted.

Gross Income
Gross income is the total income from all sources before deductions ... 
Interest Deduction
Interest deduction causes a reduction in taxable income or revenues ... 
U.S. Savings Bond Adjustment
U.S. savings bond adjustment describes a change in the amount ... 
Deposit Interest Rate
The deposit interest rate is the interest rate paid to deposit ... 
Net Interest Margin
Net interest margin is a metric that examines how successful ... 
Tax Deductible Interest
The tax deductible interest is a borrowing expense that a taxpayer ...

Investing
How Interest Rates Affect Mutual Funds
Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors. 
Personal Finance
The 7 Best Places to Put Your Savings
You work hard to put your money away for the future, but where should you keep it? 
Investing
Why Bond Prices Fall When Interest Rates Rise
Never invest in something you don’t understand. Bonds are no exception. 
Investing
Simple Math for FixedCoupon Corporate Bonds
A guide to help to understand the simple math behind fixedcoupon corporate bonds. 
Financial Advisor
The Effect of Fed Fund Rate Hikes on Your Bond Portfolio
Learn how an increase in the federal funds rate may impact a bond portfolio. Read about how investors can use the duration of their portfolio to reduce risk. 
Investing
Savings Bonds For Income And Safety
Bonds offer undeniable benefits to investors, including safety and tax advantages. 
Managing Wealth
Managing interest rate risk
Interest rate risk is the risk that arises when the absolute level of interest rates fluctuate and directly affects the values of fixedincome securities. 
Retirement
Money Market vs. ShortTerm Bonds: A Compare and Contrast Case Study
Discover characteristics of money market and shortterm bonds, including how the investments are alike and different, and the benefits and risks each offers.

What is the difference between taxable income and gross income?
Learn the basic differences between the terms gross income and taxable income, and what is included in the total of each ... Read Answer >> 
Interest Rate Risk Between LongTerm and ShortTerm Bonds
Find out the differences and effects of Interest rates between Longterm and shortterm bonds. Read how interest rate risk ... Read Answer >> 
How does a bond's coupon interest rate affect its price?
Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>