dirty = inclusive of accrued interest. clean = exclusive accrued interest.

In Kenya we trade in dirty prices.

...now you will pass that exam, won't you?

@ Mukiha

Please explain in a layman's language. Is this interest the amount of interest due at that time from the day the bond was issued? Do bonds pay interest annually or bi-annually? Do bonds have financial years?

Bonds have an issue date! The coupon is paid annually but interest is compounded semi-annually from the issue date.

Agree with Kizee that Kenyan bonds trade at clean price.

@FundamentAli: Bonds don't have financial years. They have a maturity date when they can be redeemed depending on the type of bond.

@sparkly: Since you've asked many questions, have a look at this

http://www.centralbank.g...bonds/Introduction.aspx

If you still have further questions, I will be obliged to answer to the limit of my knowledge!

When do you get the money if you buy a discounted bond and how is this done?

BTW @Impunity, bonds operate in a slightly different way than shares in the sense that you apply for a new issue by filling an application form wherein you provide your name, the offer amount(how much you want to put in) and the interest rate. The forms are then submitted to CB and then you have to wait for their call to tell you whether your application was successful or not. This is normally after 2 or so days after the deadline for application.
And now to your question, the good thing about a discounted bond is that you will pay less than the offer amount but receive the full amount on maturity. This is over and above the semi annual interests butis one-off!.