What does the term "accrued interest" refer to?

The term "accrued interest" refers specifically to the interest that accumulates on a bond between the last coupon payment date and the date of sale or redemption. When a bondholder sells a bond, the buyer must compensate the seller for the interest that has accrued since the last interest payment date because the seller was entitled to that interest. This concept is particularly relevant in the context of fixed-income securities, where interest is typically paid at set intervals. As such, when bonds are traded, it is essential to calculate accrued interest to determine the correct price for the transaction, taking into account the time elapsed since the last coupon payment.

The other options address different financial terms and concepts unrelated to the specific mechanics of how accrued interest operates within the context of bonds. For example, overdue bond interest usually refers to penalties for late payments, interest on loans pertains to borrowing costs, and tax-deductible interest relates to tax regulations rather than the calculation of interest on bonds.