Formula
The primary formula for calculating the interest accrued in a given period is:
where is the accrued interest, is the fraction of the year, is the principal, and is the annualized interest rate.
is calculated as follows:
where is the number of days in the period, and is the number of days in the year.
The main variables that affect the calculation are the period between interest payments and the day count convention used to determine the fraction of year, and the date rolling convention in use.
A compounding instrument adds the previously accrued interest to the principal each period, applying compound interest.
Read more about this topic: Accrued Interest
Famous quotes containing the word formula:
“So, if we must give a general formula applicable to all kinds of soul, we must describe it as the first actuality [entelechy] of a natural organized body.”
—Aristotle (384–323 B.C.)
“I feel like a white granular mass of amorphous crystals—my formula appears to be isomeric with Spasmotoxin. My aurochloride precipitates into beautiful prismatic needles. My Platinochloride develops octohedron crystals,—with a fine blue florescence. My physiological action is not indifferent. One millionth of a grain injected under the skin of a frog produced instantaneous death accompanied by an orange blossom odor.”
—Lafcadio Hearn (1850–1904)
“But suppose, asks the student of the professor, we follow all your structural rules for writing, what about that “something else” that brings the book alive? What is the formula for that? The formula for that is not included in the curriculum.”
—Fannie Hurst (1889–1968)