When buying or selling bonds between coupon payment dates, investors often come across two important terms: accrued interest and dirty price.
Understanding these concepts is essential for accurate pricing and return calculations. This guide explains how accrued interest and dirty price work — and includes a free Bond Accrued Interest & Dirty Price Calculator to help you compute them instantly.
Accrued interest represents the portion of the coupon payment that has accumulated since the last interest payment date but has not yet been paid to the bondholder.
When a bond is sold between coupon dates, the buyer compensates the seller for the interest earned during that time.
If a bond pays 6% annually with semi-annual coupons and is sold halfway through the period, the buyer will pay roughly 3% of the bond’s face value as accrued interest.
The dirty price is the total price the buyer pays — it includes both the clean price (the market price excluding interest) and the accrued interest.
Formula:
Dirty Price = Clean Price + Accrued Interest
This is the amount actually exchanged during a bond transaction. In contrast, the clean price is often quoted in financial markets because it reflects pure market value without time adjustments.
Knowing how accrued interest affects the dirty price helps investors avoid overpaying or underestimating bond value.
For portfolio managers and traders, precise calculation of these figures ensures accurate yield analysis, proper settlement amounts, and transparent reporting.
Even a small miscalculation can distort the perceived return (Yield to Maturity, YTM) or market risk.
The formula for accrued interest is:
Accrued Interest = Coupon Payment × (Days Since Last Coupon / Days in Coupon Period)
Example:
Face Value: $1,000
Annual Coupon Rate: 5% (semi-annual payments)
Days since last coupon: 90
Days in coupon period: 180
Accrued Interest = $25 × (90/180) = $12.50
If the clean price is $980, then:
Dirty Price = 980 + 12.50 = $992.50
To simplify these calculations, we’ve built a free online tool — the Bond Accrued Interest & Dirty Price Calculator.
Simply enter:
The calculator will instantly compute both the accrued interest and the dirty price.
The clean price excludes accrued interest, while the dirty price includes it — reflecting the total amount paid for the bond.
No, not every bond has accrued interest. There are also zero-coupon bonds selling at the discount to par and their clean price = dirty price.
It determines the actual cash exchanged during bond transactions and affects return calculations.
Accrued interest and dirty price are essential components of accurate bond valuation. Understanding and applying these correctly can make a real difference in your investment returns.
Try our Bond Accrued Interest & Dirty Price Calculator to compute your bond’s full value instantly and confidently.