1. What is Accrued Interest?

Accrued interest is the interest that has accumulated on a loan or financial obligation but has not yet been paid or received. It represents the amount of interest earned or owed over a specific period of time.

2. How Does the Calculator Work?

The calculator uses the simple daily accrual formula:

Where:

• \( Principal \) — The initial amount of money ($)
• \( Rate \) — Annual interest rate (in decimal form)
• \( Days \) — Number of days interest is being calculated for

Explanation: The formula calculates the daily interest rate by dividing the annual rate by 365, then multiplies by the number of days to get the total accrued interest.

3. Importance of Accrued Interest Calculation

Details: Accrued interest calculations are essential for accounting purposes, bond pricing, loan servicing, and financial reporting. They help determine the exact amount of interest payable or receivable between payment periods.

4. Using the Calculator

Tips: Enter the principal amount in dollars, the annual interest rate as a decimal (e.g., 0.05 for 5%), and the number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between accrued interest and regular interest?
A: Accrued interest represents interest that has accumulated but not yet been paid, while regular interest is the actual interest payment made at the payment date.

Q2: Why divide by 365 in the formula?
A: This assumes daily compounding based on a 365-day year. Some calculations might use 360 days for simplicity (banker's year).

Q3: How does this differ from compound interest?
A: This is simple interest calculation. Compound interest would include interest on previously accrued interest.

Q4: When is accrued interest typically calculated?
A: Commonly calculated between coupon payment dates for bonds or between payment due dates for loans.

Q5: Can this calculator be used for any currency?
A: Yes, as long as you consistently use the same currency for principal and result.