Enter the bond clean price ($) and the accrued interest ($) into the Calculator. The calculator will evaluate the Bond Dirty Price ($).
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Bond Dirty Price ($) Formula
BDP = CP + AI
Variables:
- BDP is the Bond Dirty Price ($)
- CP is the bond clean price ($)
- AI is the accrued interest ($)
To calculate Bond Dirty Price ($), add the bond clean price and the accrued interest together.
How to Calculate Bond Dirty Price ($)?
The following steps outline how to calculate the Bond Dirty Price ($).
- First, determine the bond clean price ($).
- Next, determine the accrued interest ($).
- Next, gather the formula from above = BDP = CP + AI.
- Finally, calculate the Bond Dirty Price ($).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
bond clean price ($) = 5,000
accrued interest ($) = 300
Frequently Asked Questions
What is the difference between Bond Clean Price and Bond Dirty Price?
Bond Clean Price refers to the price of a bond excluding any accrued interest. In contrast, Bond Dirty Price includes the accrued interest along with the clean price, representing the actual amount that would be paid if the bond is bought between interest payment dates.
Why is accrued interest added to the bond’s clean price?
Accrued interest is added to the bond’s clean price to compensate the seller for the interest that has accumulated since the last interest payment. This ensures the seller receives the interest earned up until the sale date, while the buyer is responsible for the full interest amount on the next payment date.
How can the Bond Dirty Price impact an investment decision?
The Bond Dirty Price can impact an investment decision by providing a more accurate cost of purchasing a bond. Investors can assess the true cost of their investment, including any owed interest, which helps in comparing the value and yield of different bonds more effectively.
Can the accrued interest be negative?
No, accrued interest cannot be negative. It represents the amount of interest that has accumulated on a bond since the last payment date. Since interest on a bond grows over time, the accrued interest is always a positive value or zero if no time has passed since the last payment.
