Imputed Interest

What does it mean?
A term used to describe interest considered to be paid, even through no interest payment has been made.

In Other Words...
Imputed interest is calculated based upon actual payments that are to be paid, but have not yet been paid. This interest is important for discount bonds and other securities that are sold below face value and mature at par. The IRS uses an accretive method for calculating the imputed interest on treasury bonds, which are taxed yearly, even though no interest is paid until maturity.

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Related Terms
Accretion | Accrued Interest | Applicable Federal Rate | Discount Bond | Interest

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