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Chapter 19. Working with Bonds > Calculating the Accrued Bond Interest

Calculating the Accrued Bond Interest

When you purchase a bond, the total cost isn't just the price of the bond multiplied by the number of bonds. Your broker might charge a fee, of course, but you need to consider another charge: the accrued interest. This is the portion of the next coupon payment that you owe to the previous bondholder. For example, suppose that a $1,000 face value bond has a 10% coupon with semiannual payments, which means that each payment is worth $50. If you purchase the bond halfway through the current coupon period, you owe the previous bondholder half the interest payment, or $25.

To calculate the accrued interest, you divide the number of days since the previous coupon payment—the COUPDAYSBS() calculation—by the number of coupon days in the current period—the COUPDAYS() calculation—and multiply the result by the coupon payment:


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