Accrued Market Discount

Written By
Paul Tracy
Updated June 30, 2021

What is an Accrued Market Discount?

Accrued market discount refers to the steady increase in value of a discounted bond from the time of purchase until maturity.

How Does an Accrued Market Discount Work?

The accrued market discount is a discount bond's increase in value resulting from the approach of its maturity date rather than a drop in interest rates. This occurs because the holder will receive the par value in full upon maturity, regardless of the amount by which a bond was discounted at the time of purchase. The accrued market discount is the purchase price of the bond subtracted from the bond's market value at any point in time following its purchase. 

To illustrate, suppose a bond with a $1,000 par value is purchased at a discount price of $600 and four years remaining until maturity. Over the next four years, the market value of the bond will slowly move from $600 to $1,000 as the maturity date nears. If the holder wishes to sell the bond one year later for $700, the accrued market discount would be calculated as follows: 

$700 current value - $600 purchase price = $100 accrued market value

The accrued market discount, in this instance, would be $100.

Why Does an Accrued Market Discount Matter?

The accrued market discount on a discount bond represents the value appreciation that results from an approaching maturity date rather than favorable interest rate fluctuations.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Accrued Market Discount.
Be the first to ask a question

If you have a question about Accrued Market Discount, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Accrued Market Discount, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Accrued Market Discount

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms