In standard commercial banking, corporate bond accounting, and fixed-income securities analysis, calculating interest over calendar days introduces distortions because months contain varying lengths (28, 29, 30, or 31 days). To simplify interest accrual computations, create predictable payment schedules, and align with international debt securities conventions, accounting frameworks frequently adopt a standardised 360-day calendar year consisting of twelve uniform 30-day months. Microsoft Excel provides a dedicated financial formula designed specifically for this standard: the DAYS360 function. Learning how to use the DAYS360 function in Microsoft Excel enables you to build precise financial models, loan amortisation schedules, and bond interest calculators.
Understanding the Syntax of DAYS360
The DAYS360 function requires two primary parameters and accepts an optional method flag:
=DAYS360(start_date, end_date, [method])- start_date: The initial settlement date or transaction start date. This should be entered as a cell reference containing a valid Excel serial date or formatted via
DATE(year, month, day). - end_date: The ending date or maturity date of the financial period.
- [method] (Optional): A boolean value specifying which accounting day-count convention to apply:
FALSEor omitted: US (NASD) Method. If the starting date falls on the 31st of a month, it becomes equal to the 30th of the same month. If the ending date falls on the 31st of a month and the starting date is earlier than the 30th, the ending date becomes the 1st of the next month; otherwise, it becomes the 30th.TRUE: European Method. Starting and ending dates that fall on the 31st day of a month become equal to the 30th day of the same month without shifting across month boundaries.
Basic Practical Examples of DAYS360
To calculate the days elapsed between two dates under the standard 360-day rule:
| Start Date | End Date | Formula | Result | Explanation |
|---|---|---|---|---|
| 2026-01-01 | 2026-03-31 | =DAYS360(A2, B2) |
90 | Exactly three 30-day months (3 × 30 = 90 days), despite January having 31 days and February having 28 days. |
| 2026-01-15 | 2026-07-15 | =DAYS360(A3, B3) |
180 | Exactly half an accounting year (6 × 30 = 180 days). |
| 2026-01-31 | 2026-02-28 | =DAYS360(A4, B4, TRUE) |
28 | Calculated using the European day-count method. |
Calculating Accrued Bond Interest with DAYS360
In fixed-income financial modeling, annual coupon interest is allocated across coupon dates using the day-count ratio. You can combine DAYS360 with principal and annual coupon rates to compute exact interest due:
=Principal * (Annual_Rate) * (DAYS360(Last_Coupon_Date, Settlement_Date) / 360)For example, for a £10,000 corporate bond bearing a 6% annual coupon with interest accruing from 1 January 2026 to 30 April 2026:
=10000 * 0.06 * (DAYS360(DATE(2026,1,1), DATE(2026,4,30)) / 360)The DAYS360 formula returns 120 days. Divided by 360, this equals an exact fraction of 1/3 of a year (£200 interest accrued), eliminating fractional day-count discrepancies.
Differences Between DAYS, DAYS360, and YEARFRAC
- DAYS(end_date, start_date): Calculates exact physical calendar days elapsed, including leap days and 31-day months.
- DAYS360(start_date, end_date): Evaluates duration strictly on a twelve 30-day month basis for commercial financial modeling.
- YEARFRAC(start_date, end_date, [basis]): Directly returns the fractional proportion of a year as a decimal, allowing options for Actual/Actual (basis 1), Actual/360 (basis 2), or 30/360 (basis 0 or 4).