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If memory serves, pricing using 100 is basically using a percentage. So you know what % discount or premium you are paying. Thank our lucky stars that they stopped using fractions.

Here is a quick little primer.

When you buy a bond on the open market, call it second hand not original issue, we also have to split the difference on the next coupon with the current holder. So if we are suppose to receive $100 annually, that means every 6 months we get $50. If we buy a bond 1/2 way between coupon payments the prior owner is due $25. Since we are going to receive the whole $50 payment when its due, part of our purchase price is $25 of the owed interest.

Our costs include, trading fee, price of the bond and interest owed. On your Vanguard account somewhere there is a column that tells you estimated total cost or estimated settlement cost.

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