Explain the meaning of cum-Interest Price and Ex-Interest Price.

When debentures are purchased before the date of interest a problem may arise whether the quoted price of debentures includes interest upto the date of purchase or not. Price may be quoted Ex-interest or Cum-interest.

Cum-Interest Price : When the interest accrued from the last due date of interest to the date of transaction is included in the price quoted, it is called Cum-Interest price which is the total amount paid for the purchase of debentures.

Thus, Cum-Interest Price = Payment towards Capital Portion + Payment towards Interest accrued from the last due date of interest to the date of transaction.

Ex-Interest .Price : When the interest accrued from the last due date of interest to the date of transaction is not included in the price quoted, it is called Ex-interest price or Real Price.

Thus, Ex-Interest Price = Payment towards Capital Portion