Accretion of Discount

The increase in the value of a discounted instrument as time passes and it approaches maturity. The value of the instrument will accrete (grow) at the interest rate implied by the discounted issuance price, the value at maturity and the term to maturity.

For example, a three-month note maturing at $100 is issued at $98. Between issuance and maturity, the value of the bond will increase until it reaches its full value of $100, which is the amount that will be paid at maturity.

Accretion can be accounted for in a straight-line method, whereby the increase is evenly spread throughout the term, or by constant interest, whereby the increase is heaviest closest to maturity.


Investment dictionary. . 2012.

Look at other dictionaries:

  • accretion — The process of making incremental, periodic increases in the book or carrying value of an asset. For example, when a bond is purchased at a price below 100, the difference between the purchase price and the par value, the discount, is accreted.… …   Financial and business terms

  • Accretion (finance) — In finance, accretion is the change in the price of a bond bought at a discount to the par value of the bond [ [http://financial dictionary.thefreedictionary.com/accretion Accretion definition on the financial dictionary] ] .Accretion, in a… …   Wikipedia

  • Accretion — 1. Asset growth through addition or expansion. 2. In reference to discount bonds, it describes the accumulation of value until maturity. 1. Accretion can occur through a company s internal development or by way of mergers and acquisitions. 2.… …   Investment dictionary

  • Accretion expense — In accounting, accretion expenseFact|date=February 2007 is the expense created when updating the present value(PV) of a financial instrument. For example, if one originally recognizes the present value of a liability at $650, which has a future… …   Wikipedia

  • Accretion (of a discount) — In portfolio accounting, a straight line accumulation of capital gains on discount bond in anticipation of receipt of par at maturity. The New York Times Financial Glossary …   Financial and business terms

  • Federal Reserve System — FRB and FED redirect here. For other uses, see FRB (disambiguation) and FED (disambiguation). Federal Reserve System …   Wikipedia

  • Clean surplus accounting — method provides elements of a forecasting model that gives price as a function of earnings, expected returns, and change in book value.[1][2] Clean surplus accounting is calculated by not including transactions with shareholders (such as… …   Wikipedia

  • Business valuation — is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to consummate a sale of a… …   Wikipedia

  • Net present value — In finance, the net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when… …   Wikipedia

  • Discounted cash flow — Excel spreadsheet uses Free cash flows to estimate stock s Fair Value and measure the sensibility of WACC and Perpetual growth In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.