How Do You Calculate Accrued Interest On A Bond?
Accrued interest is the amount of interest that has been earned but not yet paid on a bond. Bond interest accrues on a daily basis. Most bonds, including municipal, government and corporate bonds, pay interest on a semiannual basis. However, there are several methods used by issuers to calculate accrued interest. It is necessary to know the method employed by the issuer so that the correct calculation may be made. Calculate the methodology of accrued interest by knowing what counting convention the bond issuer uses. Accrued interest is calculated by knowing the number of days in the year that the issuer recognizes and the number of days in the month. Use the on-line calculator recommended in the Resources section, or understand and create your own accrued interest spreadsheet program below. Enter the face value of the bond in column one and the coupon rate in column two on a spreadsheet. In column three, multiply columns one and two. The result is the total interest due on the bond in
