How to Calculate Interest Accrual
- 1). Determine the number of days for which you are calculating interest. This is the time period between the last interest due date and today. As an example, the last payment was Dec 31 and today is February 18. The number of days is 49.
- 2). Multiply the principal by the interest rate. For example: 10,000 times .06 = 600
- 3). Multiply the answer from Step 2 by the number of days: 600 times 49 =29,400
- 4). Divide the answer in Step 3 by the basis, which we will assume to be 360: 29,400 / 360 = 81.67. This means that 49 days into the transaction, you have earned 81.67 in interest.
- 5). Take the interest rate and divide it by the basis and assume that is the daily rate, for a shortcut. In this case, it would be 06/360 or .000167. For each $10,000 of principal, there is a cost of $1.67 per day, multiplied for the number of days applicable.
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