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Accrued Interest
Interest earned but not yet paid, owed to the seller when a bond changes hands mid-period.
How it's calculated
Accrued interest builds up daily between coupon dates, calculated as the coupon rate applied to face value for the number of days since the last payment, using the bond's day count convention. It grows to the full coupon amount by the next payment date, then resets to zero.
Why it matters when you buy or sell
If you buy a bond between coupon dates, you pay the seller the accrued interest on top of the clean price, compensating them for interest they've earned but not yet been paid. You then receive the full coupon on the next payment date, effectively getting reimbursed.
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