# How Is Accrued Interest Calculated?

## What is Accrued Interest?

Accrued interest refers to the amount of unpaid interest that has accumulated on an account even though is hasn't been paid out yet. For example, if you have a certificate of deposit that pays interest once a month, interest is accruing each day not just on the day that is it paid.

## How to Calculate Accrued Interest

Determine the interest rate. For example, your certificate of deposit may pay an interest rate of 3.65 percentper year. Next, determine how many days are in the period. Since the interest rate is per year, divide the interest rate by 365 days. Divide the interest rate by the number of days in the period. Your certificate of deposit's daily interest rate would be 0.01 percent. Then calculate the amount of interest that accrues per day. If you had \$10,000 in your CD, interest would accrue at a rate of \$1 per day. Then multiply the daily rate times the number of days that interest had been accruing. For example, if it had been 20 days since the last interest payment, you would have \$20 in accrued interest.