Bond Accrued Interest
Interest earned since the last coupon payment
What is Bond Accrued Interest?
Accrued interest is the interest earned on a bond since the last coupon payment date but not yet paid to the current holder. When bonds trade between coupon dates, the buyer must compensate the seller for the interest accrued up to the settlement date. The "clean price" quoted in markets excludes accrued interest; the "dirty price" (full price) includes it and is what the buyer actually pays. For example, if you buy a bond halfway through a coupon period, you pay the clean price plus half a coupon in accrued interest, then receive the full coupon on the next payment date, recovering that accrued portion. Accrued interest is calculated using the actual/actual day count convention for US Treasuries and 30/360 for most US corporates.
Formula
Accrued Interest = Face × (Annual Coupon Rate / n) × (Days Since Last Coupon / Days in Period)
Dirty Price = Clean Price + Accrued Interest
n = coupon payments per year
Days in Period = days between last and next coupon date
Calculator
How to Use
- 1Find days since last coupon: Count the calendar days from the last coupon payment date to the settlement date.
- 2Find days in the coupon period: Days between last coupon date and next coupon date (≈180 for semi-annual).
- 3Calculate accrued interest: Face × (Rate/n) × (Days Elapsed / Period Days). This is what you pay on top of the clean price.
- 4Compute dirty price: Clean price + accrued interest = total settlement amount.
Worked Example
Example: Semi-annual bond, 45 days after coupon
Face
$1,000
Coupon
5%
Days Elapsed
45
Period
180 days
Semi-annual coupon = $1,000 × 5% / 2 = $25. Accrued = $25 × (45/180) = $6.25. If the clean price is $980, the dirty price (what you actually pay) = $980 + $6.25 = $986.25. At the next coupon date, you receive the full $25 coupon, and the $6.25 is the recovery of what you pre-paid at purchase.