1. What is Accrued Interest?

Accrued interest is the interest that has been earned but not yet paid. For a 3-month deposit, it represents the interest accumulated over that 90-day period based on the principal amount and annual interest rate.

2. How Does the Calculator Work?

The calculator uses the simple interest formula for a 90-day period:

Where:

• \( Principal \) — Initial deposit amount
• \( Rate \) — Annual interest rate in decimal form (e.g., 0.05 for 5%)
• \( 90/365 \) — Time factor for 3 months (90 days) of a 365-day year

Explanation: The formula calculates the portion of annual interest that would be earned in a 90-day period.

3. Importance of Accrued Interest Calculation

Details: Calculating accrued interest helps investors understand their potential earnings from short-term deposits and compare different investment options. It's essential for financial planning and cash flow management.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the annual interest rate as a decimal (e.g., enter 0.05 for 5%). The calculator will compute the interest that would accrue over a standard 3-month (90-day) period.

5. Frequently Asked Questions (FAQ)

Q1: Why use 90/365 in the calculation?
A: This represents the portion of a year (365 days) that 3 months (90 days) covers, converting the annual rate to a 3-month rate.

Q2: Does this account for compound interest?
A: No, this is a simple interest calculation. For compound interest, the calculation would be more complex.

Q3: What if the year has 366 days (leap year)?
A: The difference is negligible for most purposes, but you could use 90/366 for slightly more precision in a leap year.

Q4: Can I use this for periods other than 3 months?
A: This specific calculator is designed for 3-month periods. For other timeframes, you would need to adjust the day count.

Q5: How do I convert percentage rate to decimal?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).