Example
A corporate bond has a coupon rate of 7.2% and pays 4 times a year, on the 15th of January, April, July, and October. It uses the 30/360 US day count convention.
A trade for 1,000 par value of the bond settles on January 25. The prior coupon date was January 15. The accrued interest reflects ten days' interest, or $2.00 (7.2% of 1,000 * (10 days/360 days)).
The full value of these bonds is set by the market at $985.50. The following table illustrates the values of these terms.
The market convention for bond prices assigns a dirty price of 98.55 to the trade, not 0.9855. This is sometimes referred to as the price for 100 par value.
| Term | Value |
|---|---|
| Par value | 1,000.00 |
| Full market value | $985.50 |
| Dirty price | 98.55 |
| Accrued interest | $2.00 |
| Flat market value | $983.50 |
| Clean price | 98.35 |
Read more about this topic: Dirty Price
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