Accrued Interest, Clean Price, and Dirty Price
Accrued Interest
When a bond holder sells the bond to a new buyer between the coupon dates, there will be some interest earned on the bond since the time the last coupon date. This interest is called the accrued interested and must be paid to the seller of the bond. Subsequently, the new owner of the bond will receive all the coupon payments on the bond. The accrued interest will be a fraction of the coupon rate, depending on the date of transaction in the secondary market, which is somewhere between the date of previous coupon disbursal and the subsequent coupon disbursal.
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