Accrued Interest
Interest that has accumulated since the last coupon payment, paid by the buyer to the seller.
Accrued interest is the daily buildup of interest between coupon payments. When you buy a bond mid-cycle, you compensate the seller for the portion of the next coupon they 'earned' by holding the bond up to the sale date. When the next coupon arrives, you (the new owner) receive the full amount — but you already paid the seller for the days they held it. Think of it like buying a rental property mid-month: you'd reimburse the seller for rent they're entitled to from the 1st through the sale date. Accrued interest ensures fairness for both parties. The exact calculation depends on the bond's day-count convention (30/360, ACT/365, etc.), which determines how to measure the fraction of the coupon period that's passed.
Formula