1. What is Accrued Interest?

Accrued interest is the amount of interest that has accumulated on a debt or investment but has not yet been paid or received. It accounts for the time value of money between payment periods.

2. How Does the Calculator Work?

The calculator uses the accrued interest formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (decimal)
• \( \text{End Date} - \text{Start Date} \) — Number of days between dates
• \( \text{Payments} \) — Any payments made toward interest ($)

Explanation: The formula calculates simple interest accrued over time, accounting for any payments made against that interest.

3. Importance of Accrued Interest Calculation

Details: Accurate accrued interest calculation is crucial for financial reporting, tax purposes, loan amortization, and investment analysis.

4. Using the Calculator

Tips: Enter principal in dollars, interest rate as a decimal (e.g., 0.05 for 5%), valid dates, and any payments made. The end date must be after the start date.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound accrued interest?
A: This calculator uses simple interest. Compound interest would involve calculating interest on previously accrued interest.

Q2: Why divide by 365?
A: This assumes actual/actual day count convention. Some calculations use 360 days for simplicity.

Q3: How are partial payments handled?
A: Payments are subtracted from the total accrued interest amount.

Q4: Can I use this for bonds or other investments?
A: Yes, for simple interest calculations. More complex instruments may require different methods.

Q5: What if my interest compounds?
A: This calculator is for simple interest only. Compound interest requires a different formula.