- How to Calculate Weighted Duration Bond
- How to Calculate Accrued Interest Payable
- How to Estimate the Final Maturity Value on Savings Bonds
- How to Calculate Simple Interest on a Per Diem Basis
- Examples of Compound Interest & Simple Interest
- How to Calculate Imputed Interest on Non-Interest Bearing Notes
Notes are fixed-term investments, which grow in value due to interest. After a certain period of time, notes "mature," which means they pay the investor the face value plus any accrued interest. Depending on the note, interest may be simple or compounded. Short-term notes, such as 30-day or 90-day notes, typically use simple interest. Multi-year notes typically use compounded interest, which means the accrued interest also grows in value.
Divide the note investment term, in days, by 365 to calculate the fraction of a year. Some companies use 360 days when calculating years, so confirm this figure before performing your calculation. As an example, a 30-day note would be 0.082192 of a year when using 365 days to constitute a full year.
Multiply this figure by the annual interest rate, in decimal form. In the example, an 8 percent interest rate would be 0.0065753 for the term.
Add 1 to this figure. In the example, you get 1.0065753.
Multiply this figure by the note's face value to calculate the maturity value. In the example, a $5,000 note would have a maturity value of $5,032.88.
Add 1 to the interest rate, in decimal format. As an example, an 8-percent interest rate would gives you 1.08.
Raise this figure to the power of the number of years on the note. In the example, a 5-year note, compounded annually, is calculated as 1.08 to the power of 5, which gives you 1.46933.
Multiply this figure by the note's face value to calculate its maturity value. In the example, this gives you a maturity value of $7,346.64.