When a bond is sold between coupon payment dates,the buyer pays the seller for the __________,which is the prorated share of the upcoming coupon payment.

Question

When a bond is sold between coupon payment dates,the buyer pays the seller for the __________,which is the prorated share of the upcoming coupon payment. ​

Quizplus · Accepted Answer

Accrued interest is the prorated share of the upcoming coupon payment that has accrued since the last coupon payment date. When a bond is sold between coupon payment dates, the buyer pays the seller for the accrued interest on top of the price of the bond. This ensures that the seller receives the full amount of interest that they are owed for holding the bond up until the date of sale. Prepaid interest would refer to paying in advance for future coupon payments, which is not the case in this scenario. Bond premium and bond discount refer to the price of the bond itself and are not directly related to coupon payments or accrued interest.

When a Bond Is Sold Between Coupon Payment Dates,the Buyer