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Fixed Income (Bond Market) Interview Preparation



Question: What is accrued interest?

Answer: Because the trade is settled between coupon dates, it means the seller had held the bond for few days and for those many days the interest should go to seller. That interest is called accrued interest and that is calculated based on the following formula.
Accrued Interest= Coupon*(Number of days between settlement days and last coupon date/basis days)
Basis days can be actual 365/2 or 180 days.
Buyer has to compensate the seller for that accrued interest date. Dirty price include the accrued interest in it.


Question: What is clean price or flat price for a bond?

Answer: A clean price or a flat price is a price which is dirty price minus accrued interest.


Question: In United states what price is quoted?

Answer: In United States price is quoted is a clean price. But buyer has to pay the accrued interest to the seller, means in reality it would pay the full price.


Related Questions


Question: What is accrued interest?

Question: What is clean price or flat price for a bond?

Question: In United states what price is quoted?

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