Accrued interest on a bond refers to the the interest that has been earned but not yet paid since the most recent interest payment. At the end of this accrual period (typically six months or a year) bonds generally pay interest. These are known as "coupon" payments. Depending on the bond, interest can be calculated in different ways. They all use what's called a "day-count fraction" or DCF. This refers to the number of days in a month or year, a number that is standardized for any given bond. For example, many bonds calculate interest by allocating 30 days to a month and 360 days to a year. Others may use the actual number of days in a month and year. To calculate your accrued interest, you must first know which of these methods is used for your bond and then do a few simple calculations.
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