Accrued interest (clean versus dirty bond price)

The full price of a bond, transacting between buyer and seller, includes accrued interest (the fraction of the next coupon earned by the seller). Full price (a.k.a, dirty or invoice) - Accrued interest = Clean Price.

Category:

Education

Tags:

• Finance
• Bonds
• Excel

[SebastiaanHuijbregts]

When moving to the maturity date, the clean price should move to nominal value. I calculated a clean price of 106,23 with 3,25 periods to maturity, which is lower - as expected - than 107,62.

[bionicturtledotcom]

@SebastiaanHuijbregts you are correct, keen observation: the bond should pull to par. My mistake: i mistakenly (in the lower right) prices a bond with 2.5 years (5 periods) instead of comparable 2.0 years above. (consistent with your observation, that bond has longer maturity --> higher clean price). I think the isolated Accrued Interest is still valid per the days calcs, but I actually subtracted it from a 2.5 year bond in the lower panel. Thank you for your assistance! David

[SebastiaanHuijbregts]

How can the clean price with 4 periods to maturity (107,62) be lower than the clean price with 3,25 periods to maturity (108,06)?

[MrWillsean]

Thank you very much for the very clear and thorough explanation.

[ABHA2008]

its not helping!!!! at all