Accrued Interest

Accrued interest is the interest that has accumulated between the most recent interest payment and the sale of a bond.

Here's an example of how it works:

Bob owns a $1,000 bond at 5% interest. After an interest payment, 90 days later he decides to sell the bond to Ted. Ted will have to pay Bob the current price of the bond plus the interest that accrued during the 90 days since the last interest payment. On a $1,000 bond at 5%, the accrued interest would be $12.33. So, Ted would pay Bob the value of the bond in the market plus $12.33 in accrued interest.