Legal Definitions - interest warrant

An interest warrant is a financial document, much like a check, that authorizes or directs the payment of a specific amount of interest to a named recipient. It serves as a formal instruction or certificate for the payment of interest that is due, often issued by corporations, governments, or trustees to distribute earnings to bondholders, beneficiaries of trusts, or other entitled parties. The holder can then cash or deposit this warrant to receive the interest payment.

• Example 1: Corporate Bond Payments

  Imagine a large technology company that has issued bonds to finance its expansion. These bonds promise to pay interest to investors every six months. Instead of directly transferring funds, the company's treasury department might mail an interest warrant to each bondholder. This document specifies the amount of interest due for that particular period, which the bondholder can then deposit into their bank account, much like a regular check.

• Example 2: Government Securities

  A state government issues municipal bonds to fund improvements to its public transportation system. An individual investor purchases some of these bonds. Every quarter, the state's financial office sends an interest warrant to the investor. This warrant represents the interest earned on their investment in the municipal bonds for that three-month period, allowing them to collect their earnings.

• Example 3: Trust Fund Distributions

  Consider a trust fund established by a grandparent for their grandchild's future education. The assets within the trust generate income, including interest from various investments. The trustee, who manages the fund, decides to distribute a portion of this earned interest annually to the grandchild to help with current educational expenses. The trustee would issue an interest warrant to the grandchild, detailing the specific amount of interest being paid out from the trust for that year.