This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
Why bond buyers pay extra
Most bonds pay interest in fixed coupons, often twice a year in the United States. Interest builds up day by day between coupon dates, but the whole coupon goes to whoever holds the bond on the record date. To make the trade fair, the buyer pays the seller the interest accrued since the last coupon. This amount is added to the quoted price.
The formula
Accrued interest = face value × annual coupon rate ÷ coupons per year × days since last coupon ÷ days in the coupon period
The number of days depends on the bond’s day count convention:
| Convention | Used for | How days are counted |
|---|---|---|
| Actual/actual | US Treasuries, most government bonds | Real days elapsed ÷ real days in the period (181 to 184 for semiannual) |
| 30/360 | Most US corporate, agency and municipal bonds | Every month counts as 30 days, every half-year as 180 |
| Actual/360 | Money-market instruments, some floating-rate notes | Real days ÷ 360 |
Example
You buy $10,000 face value of a bond with a 4.5% coupon paid semiannually, 90 days after the last coupon in a 182-day period, at a quoted price of 98.5:
- Each coupon is 10,000 × 4.5% ÷ 2 = $225
- Accrued interest = 225 × 90 ÷ 182 = $111.26
- Clean price: 98.5% × 10,000 = $9,850
- Total to pay (dirty price): 9,850 + 111.26 = $9,961.26
On the next coupon date, you receive the full $225, so your net interest for the 92 days you held the bond is $113.74.
Clean and dirty prices
Bond prices are quoted clean, without accrued interest, so the quote moves only with interest rates and credit quality. Otherwise the price would rise steadily between coupons and drop on each payment date. The dirty or full price, clean plus accrued, is what changes hands at settlement. Yield calculations use the dirty price.
Special cases
- Zero-coupon bonds and T-bills have no accrued interest; the return comes from the price rising toward face value.
- Bonds in default usually trade flat, without accrued interest.
- Settlement date matters, not trade date: interest accrues up to the day the trade settles, usually one business day after the trade for US Treasuries and corporates.
Taxes
In the United States, accrued interest paid at purchase is generally deducted from the first coupon reported as income, and accrued interest received at sale is reported as interest income. Brokerage tax forms usually show these amounts, but check with a tax professional for complex cases.