Calculator Panel
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Enter your values above and click Calculate.
What This Calculator Does
This calculator determines the accrued interest of a bond between payment dates, showing the exact premium a buyer must pay the seller on secondary markets.
How to Use This Calculator
Enter par value, coupon rate, payment frequency, days elapsed since last payment, and total days in the current coupon period. Click Calculate to determine the accrued interest.
How the Calculation Works
The underlying math engine processes your inputs using exact formulas. This systematic approach ensures professional, institutional-grade calculation precision:
Mathematical Formula
Formula Legend:
- · Par = Bond face value.
- · Coupon Rate = Annual rate (decimal).
- · f = Frequency of payments per year.
- · Days Since = Actual days elapsed since last coupon payment.
- · Days in Period = Total days in the current coupon interval (usually 180 to 184).
Practical Example
Suppose you sell a semiannual-pay bond (f=2) with $1,000 par value, 6.0% coupon rate, 45 days after the last coupon payout. The current coupon period is 182 days:
Step-by-Step Mathematical Walkthrough:
- 1 Annual interest is 6% of $1,000 = $60.00.
- 2 Periodic coupon payment = $60.00 / 2 = $30.00.
- 3 Accrued Interest = $30.00 * (45 / 182) = $30.00 * 0.24725 = $7.42.
- 4 The buyer pays the seller the market price plus $7.42 of accrued interest.
Important Assumptions & Notes
- Days are calculated based on standard conventions (30/360 or Actual/Actual).
- Coupon rate remains steady and distributions are paid regularly.
Common Mistakes or Considerations
- Failing to account for accrued interest when budgeting secondary bond purchases (leads to surprise transaction costs).
- Confusing the clean price (quoted market price) with the dirty price (price paid including accrued interest).
Frequently Asked Questions
What is accrued interest on a bond?
Accrued interest is the interest that has accumulated on a bond since the last scheduled interest payment. It represents the interest earned by the seller but not yet paid by the issuer.
What is Clean Price vs. Dirty Price?
Clean Price is the standard market price of a bond excluding accrued interest. Dirty Price is the total cash price a buyer pays, which equals Clean Price plus Accrued Interest.
Who pays accrued interest during a bond sale?
The buyer of the bond pays the accrued interest to the seller. When the next coupon date arrives, the buyer receives the full interest payment from the issuer.
Why is accrued interest necessary?
It ensures fairness on secondary markets. Sellers are compensated for the exact days they held the bond, and buyers only retain the yield they are entitled to.
What day-count conventions are used?
US corporate and municipal bonds typically use 30/360 (assumes 30-day months and 360-day years). Government bonds use Actual/Actual (exact elapsed calendar days).