Accrued interest

The interest that has been earned on a bond since its most recent dividend was paid. The market price for bonds ignores this element; it quotes the price of bonds "clean" of accrued interest. However, a buyer would have to pay for the interest that has accrued. Imagine a bond with a 10% coupon. If it were quoted in the market at $125 120 days after the last dividend had been paid then, ignoring dealing costs, a buyer would have to pay $125 plus 120/365 of $10; that is, $128.29.