Series 27: Interest Payments

Interest Payments

Bonds are generally quoted at a flat price, also called a clean price. This means accrued interest is not factored into the quote. Such bonds are said to be quoted ex interest, meaning without interest. However, bonds are usually traded at the dirty price, which does include accrued interest. These bonds are said to be traded cum interest, meaning with interest.

Clean prices are more stable, because when they change, they do so for some economic reason, such as rising or falling interest rates or a change of credit quality. This makes it easy for a prospective buyer to assess the value of the bond as it relates to the principal on the bond certificate.

The dirty price, h