Accrued coupon interest (ACI)

What is ACI?

Accrued coupon interest (ACI) is the sum of bond interest that has accumulated since the previous bond interest payment. If a bond is bought or sold between these coupon payment dates, the seller is entitled to the interest that has accrued from the last coupon payment date up to the date of the sale.

How is ACI calculated?

Face value * Coupon rate / 100 * Day count fraction

• Face value: The nominal value of the bond.
• Coupon rate: The annual interest rate paid by the bond, expressed as a percentage of the face value.
• Day count fraction: The fraction of the coupon period that has elapsed since the last coupon payment, based on a specified day count convention (e.g., Actual/Actual, 30/360, etc.). For detailed information, you can read the article Day count basis.

Why is ACI important?

Accrued coupon interest is vital for investors because it guarantees fair compensation for the interest accumulated on a bond between coupon payments. This is crucial for accurate bond pricing, as the buyer pays the clean price (the bond's price without accrued interest) plus the accrued interest, known as the dirty price. Understanding ACI enables investors to make informed decisions and ensures transparency and fairness in bond transactions.