Clean Price

Bond prices are normally quoted as clean prices, expressed as a percentage of face value, such as 98.50. Excluding accrued interest makes it easier to compare bonds and see real changes in value, since accrued interest rises steadily between payment dates and then drops to zero when interest is paid.

If prices were quoted including accrued interest, they would jump up and down around every payment date, even if market conditions had not changed.

For example, a bond might be quoted at a clean price of 98 per 100 of face value. If accrued interest is about 0.83 per 100, the buyer actually pays the dirty price of about 98.83.

The clean price reflects the market’s view of the bond’s value, based on interest rates and credit risk. The amount actually paid in a transaction is the dirty price, which adds accrued interest. Understanding the difference helps investors interpret quotes and calculate returns correctly.