Accrued Interest

Accrued Interest is the interest that adds up (ie accrues) each day between coupon payments.
The accrued interest represents the unpaid part of the coupon since the last interest payment.
In the US and Canadian bond markets the accrued interest is added to the quoted price of the bond so it represents the total amount you will actually pay.
In most European markets the accrued interest is not added to the quoted price of the bond.

questions - how many days in a year
questions - how many days in a month

Accrued interest is reinvested at exactly the same rate throughout the life of the whole bond.
We obviously need a way of calculating the yield on all the days in between the coupon dates as well.
When an investor sells a bond in between coupon dates this investor receives a proportion of the next coupon payment.
This amount is known as the accrued income.
This is the accrued income on the next coupon payment.

If you buy or sell a bond it matures you will most likely catch the bond between coupon payments.
If you are selling you are entitled to the price of the bond plus the accrued interest that the bond has earned up to that point.
The buyer compensates you for this by adding the accrued interest to the current price.

This is the amount of the coupon payment that the holder of the bond has earned since the last coupon payment

SS - equation
Include only one of the two bracketing dates
If this is the first coupon, use the dates date instead of the previous coupon date.

SS - Equation

coupon days accrued - COUPDAYBS
number of days in period - COUPDAYS

The interest earned between coupons is simple interest and not compounded

Excel Functions

ACCRINT	Returns the accrued interest for a security that pays interest periodically.
ACCRINTM	Returns the accrued interest for a security that pays interest at maturity.

Following Business Day

Following Business Day (Modified)

Previous Business Day

Previous Business Day (Modified)