What Is Accrued Interest?
A bond pays its coupon on fixed dates — typically every six months. But interest is earned continuously, a little every day. Between two coupon dates the bond builds up interest that has not yet been paid. That build-up is the accrued interest.
It matters the moment a bond changes hands mid-period. The seller held the bond for part of the current coupon period and is entitled to their share of the coupon that has accrued so far. Since the buyer will receive the whole next coupon, the buyer compensates the seller by paying the accrued interest on top of the agreed price. Nothing is lost or created — the coupon is simply split between the two of you in proportion to how long each held the bond.
The Core Formula
Accrued interest = coupon for the current period × (fraction of the period that has elapsed).
The "fraction" is measured with the bond's day-count convention, which is what makes 30/360, Actual/Actual and Actual/360 give slightly different answers.
Clean Price vs Dirty Price
Bond screens, brokers and news services almost always quote the clean price — the price with accrued interest stripped out. The amount you actually pay to settle the trade is the dirty price (also called the full or invoice price):
Dirty price = Clean price + Accrued interestWhy quote clean? If bonds were quoted dirty, the price would creep upward every single day as interest accrued, then drop sharply on each coupon date — a sawtooth that has nothing to do with the market's actual view of the bond. Stripping out accrued interest gives a stable number you can compare across bonds and over time, while the accrued piece is added back separately at settlement.
Day-Count Conventions Explained
A day-count convention is simply the rule for counting the days in the numerator and denominator of that "fraction of the period". Different markets adopted different rules, and using the wrong one gives the wrong invoice.
| Convention | How days are counted | Typically used for |
|---|---|---|
| 30/360 | Every month is treated as 30 days and every year as 360 days (with end-of-month adjustments). Clean, round periods. | US corporate & agency bonds, many Eurobonds |
| Actual/Actual (ICMA) | Actual calendar days accrued ÷ actual days in the current coupon period. The most economically exact method. | US Treasuries, most government bonds |
| Actual/360 | Actual calendar days ÷ a fixed 360-day year, so a full year accrues slightly more than one year's coupon. | Money-market instruments, floating-rate notes |
Use the Bond's Own Convention
The convention is set in the bond's prospectus — it is a property of the security, not a choice you make. Pricing a Treasury with 30/360, or a corporate with Actual/Actual, will give a subtly wrong accrued amount. When in doubt, check the term sheet.
Three Worked Examples
Each example below is computed by hand so you can check the calculator against a known result.
Example 1 — 30/360, semiannual
Face $1,000 · coupon 6.00% · semiannual · last coupon 15 Jan 2024 · settlement 15 Apr 2024.
30/360 days from 15 Jan to 15 Apr = 360·(0) + 30·(4−1) + (15−15) = 90 days.
Accrued = 1000 × 6.00% × 90/360 = 1000 × 0.06 × 0.25.
Sanity check: 90 of the 180-day period has elapsed — exactly half of the $30 semiannual coupon.
Accrued interest = $15.00
Example 2 — Actual/Actual (ICMA), semiannual
Face $10,000 · coupon 5.00% · semiannual · coupon per period = 10000 × 5%/2 = $250.
Last coupon 30 Jun 2023 · next coupon 31 Dec 2023 · settlement 30 Sep 2023.
Actual days accrued (30 Jun → 30 Sep) = 92. Actual days in the period (30 Jun → 31 Dec) = 184.
Accrued = 250 × 92/184 = 250 × 0.5.
Accrued interest = $125.00
Example 3 — Actual/360, quarterly
Face $100,000 · coupon 4.00% · quarterly · last coupon 1 Mar 2024 · settlement 1 May 2024.
Actual days (1 Mar → 1 May) = 31 + 30 = 61. Denominator is a fixed 360-day year.
Accrued = 100000 × 4.00% × 61/360 = 4000 × 0.169444….
Accrued interest = $677.78
Buyer & Seller Mechanics
Put the pieces together with a concrete trade. Suppose you buy the Example 1 bond at a clean price of 98.00 (i.e. $980 per $1,000 of face):
- Clean price you agree on: $980.00 — the quoted number, comparable across bonds.
- Accrued interest you add: $15.00 — the seller's share of the coupon so far.
- Dirty price you actually pay: $995.00 — the cash that leaves your account at settlement.
Three months later, on the next coupon date, you (now the holder) receive the whole $30 coupon. You already reimbursed the seller for their $15, so your net coupon income for the period you held is $15 — exactly right. The accrued-interest mechanism keeps everyone's income proportional to their holding period.
It Also Matters at Tax Time
In many jurisdictions the accrued interest you pay a seller is deductible against the coupon you later receive, so you are not taxed on income you effectively refunded. Keep your trade confirmations — see our bond tax report for how accrued interest, amortization and OID flow through a return.
Frequently Asked Questions
Track Every Coupon Automatically
AllInvestView records accrued interest, coupon dates and yield to maturity for every bond you hold — no spreadsheet, no manual day counting.
Start Tracking Free