What do you mean by Accretion Amount ?
Accretion Amount is the restrained and stepwise growth of capital assets and earnings for the expansion of a business. It also refers to the company’s internal growth, acquisitions, and mergers. In the world of finance, accretion is the accumulation of earnings that an investor anticipates receiving when he or she buys a bond at a discounted price and holds onto it till it matures. The most common applications of accretion in finance cover cumulative preferred stock or zero-coupon bonds. Accretion amount balances the cost basis from the amount of purchase (discount) to the redemption amount expected at the time of maturity. For instance, if a bond is bought at an amount which is 80% of the face value, then the accretion is 20% in such case.
How to Calculate Accretion Amount?
Accretion Amount calculator uses Accretion Amount = ((Purchase Basis)*(Yield to Maturity/Accrual Period Per Year))-Coupon Interest to calculate the Accretion Amount, Accretion Amount refers to the increase in the value of a financial instrument during a specific period. Accretion Amount is denoted by AA symbol.
How to calculate Accretion Amount using this online calculator? To use this online calculator for Accretion Amount, enter Purchase Basis (PB), Yield to Maturity (YTM), Accrual Period Per Year (APPY) & Coupon Interest (CI) and hit the calculate button. Here is how the Accretion Amount calculation can be explained with given input values -> 394500 = ((2000)*(1200/6))-5500.