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:
““It’s hard enough to adjust [to the lack of control] in the beginning,” says a corporate vice president and single mother. “But then you realize that everything keeps changing, so you never regain control. I was just learning to take care of the belly-button stump, when it fell off. I had just learned to make formula really efficiently, when Sarah stopped using it.””
—Anne C. Weisberg (20th century)
“For the myth is the foundation of life; it is the timeless schema, the pious formula into which life flows when it reproduces its traits out of the unconscious.”
—Thomas Mann (1875–1955)
“My formula for greatness in human beings is amor fati: that one wants to change nothing, neither forwards, nor backwards, nor in all eternity. Not merely to endure necessity, still less to hide it—all idealism is mendacity in the face of necessity—but rather to love it.”
—Friedrich Nietzsche (1844–1900)