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# What is accrued interest on bonds

Accrued interest is not an expense, but the interest that has been earned by the bondholder but has not yet been paid out. Although a coupon payment is made on a specific date, interest accrues on a daily basis from the last coupon payment date, and the buyer needs to pay this money to the seller when buying the bond. Accrued interest will be reset after a coupon payment is made.

The formula to calculate the Unit Accrued Interest (shown on the bond detail page) is as follows:

Unit Accrued Interest = Bond Par Value * Coupon Rate * Coupon Factor

In particular, Coupon Factor depends on the day count convention of the bond. Generally, at Moomoo SG, the day count convention is 30/360 for corporate bonds, and ACT/ACT for governmental bonds.

Taking a corporate bond with a 30/360 day count convention as an example. Assuming its coupon rate is 8.1%, interest is paid semi-annually, the last coupon payment date is 2023/07/15, and the next coupon payment date is 2024/01/15, then on 2023/11/11, the coupon factor is [360 * (2023 - 2023) + 30 * (11 - 7) + (11 - 15)] / 360 = 0.322, and the accrued interest is 100 * 8.1% * 0.322 = \$2.61.

The accrued interest on a bond transaction is calculated as follows:

Accrued Interest = Unit Accrued Interest * Transaction Nominal Value / Bond Par Value

Assuming the unit accrued interest on Bond A is 2.61, and the transaction nominal value is \$200,000, then the accrued interest on the transaction is 2.61 * 200,000 / 100 = \$5,220

Note: Since the bond transaction is settled at T+2, both the unit accrued interest and the accrued interest mentioned above accumulate up to T+2.