Accrued interest

In finance, accrued interest is the interest that has accumulated since the principal investment. For a financial instrument such as a bond, interest is calculated and paid in set intervals.

Formula

The primary formula for calculating the interest accrued in a given period is:

<math> I_A = T \times P \times R <math>

where <math>I_A<math> is the accrued interest, <math>T<math> is the fraction of the year, <math>P<math> is the principal, and <math>R<math> is the annualized interest rate.

<math>T<math> is calculated as follows:

<math> T = \frac{D_P}{D_Y} <math>

where <math>D_P<math> is the number of days in the period, and <math>D_Y<math> is the number of days in the year.

A Date rolling comes into effect because many instruments can only pay out accrued interest on