# Convertible Note Calculator | Interest and Shares > Calculate accrued interest, conversion price and shares when a convertible note converts in a priced round, and whether the valuation cap or discount applies. URL: https://raziel.co/tools/convertible-note-calculator See how much interest a convertible note has accrued, the price it converts at in a priced round, and how many shares the holder receives. ## Results Shares at conversion Valuation cap applies 340,625 $272,500 of principal and interest at $0.8000 per share **Accrued interest** $22,500 Over 1.5 years **Amount converting** $272,500 Principal plus interest **Conversion price** $0.8000 33.3% below the $1.2000 round price **Effective price per share** $0.7339 Principal only, 38.8% below the round price **Cap price** $0.8000 Discount price $0.9600 **Value at the round price** $408,750 1.64x the principal at the round price For education only. Not tax, legal or investment advice. Track notes in Raziel Keep convertible notes, SAFEs and priced rounds in one startup portfolio, with every term in one place. [Start free](https://app.raziel.co/sign-up) The math ## How a note *converts* A convertible note is a loan that turns into equity. Interest builds up while it is outstanding, and at the next priced round the principal and the interest convert into shares at a better price than the new investors pay. 1. **Add up what converts.** Interest accrues from the issue date to the conversion date, simple or compounding, and is added to the principal. 2. **Price it at the cap.** The cap sets a ceiling on the valuation the note converts at, so the cap price is the round price scaled down by the cap over the pre-money valuation. 3. **Price it at the discount.** Take the round price and knock off the discount. 4. **Use the lower price.** The note converts at whichever gives the holder more shares. With neither a cap nor a discount, it converts at the round price. Interest (simple) = principal x rate x years Converting amount = principal + interest Cap price = round price x cap / pre-money valuation Discount price = round price x (1 - discount) Conversion price = lower of cap price and discount price Shares = converting amount / conversion price Effective price = principal / shares ### Assumptions and simplifications - The cap is treated as a pre-money cap on the same fully diluted share count the round is priced on. Notes that define the capitalization differently (for example, including the converting notes) give slightly different share counts. - With dates, time is counted as actual days divided by 365. - One note, or several notes on identical terms entered as their total. Maturity, repayment, change-of-control premiums and MFN clauses are not modeled. - No rounding of fractional shares. Worked example ### A $250K note at 6%, $8M cap, 20% discount **Interest over 18 months** $250,000 x 6% x 1.5 = $22,500 $272,500 **Cap price** $1.2000 x $8M / $12M = $0.8000 **Discount price** $1.2000 x 80% = $0.9600 **Converts at the valuation cap** $272,500 / $0.8000 = 340,625 shares **Effective price** $250,000 / 340,625 = $0.7339 (38.8% off) Shares at conversion**340,625** ## Further reading - [Raziel Learn Convertible Note vs SAFE: Differences and What to Track After the Wire](https://raziel.co/learn/convertible-notes-vs-safes-startup-investment) - [Raziel Learn How to Track Convertible Notes After You Wire](https://raziel.co/learn/convertible-note-tracking) - [Raziel Learn SAFE Valuation Cap and Discount: How Conversion Works](https://raziel.co/learn/safe-notes-valuation-caps-discounts) ## Frequently Asked Questions Common questions about the Convertible Note calculator and the math behind it. ### How does a convertible note convert? At the next priced round, the principal plus accrued interest turns into shares. The price per share is the lower of the cap price (the round price scaled down by the cap divided by the pre-money valuation) and the discount price (the round price minus the discount). Dividing the converting amount by that price gives the share count. ### Does the interest convert too? Usually yes. Most notes convert accrued interest into shares along with the principal instead of paying it in cash, which is why a note gets more shares than a SAFE with the same cap and discount. Check your note: some pay interest in cash or let the company choose. ### Is the interest simple or compounding? Most startup notes use simple interest, often in the 4% to 8% range. Some compound annually or monthly. Pick the method your note uses; over 12 to 24 months the difference is small, but it grows with time and rate. ### What is the effective price per share? The principal divided by the shares received. Because interest converts into extra shares, the holder’s effective price is below the conversion price. It is the cleanest way to compare a note with the price new investors pay. ### What happens if the note reaches maturity before a priced round? That depends on the note. Common outcomes are an extension, conversion at a stated valuation, or repayment. This calculator models conversion in a priced round only; enter the terms that apply if your note converts on different ones. Related tools ## More free *calculators* [All tools](https://raziel.co/tools) - [Startups and SAFEs Startup Valuation Calculator Pre-money, post-money, price per share and dilution for a round. Open calculator](https://raziel.co/tools/startup-valuation-calculator) - [Startups and SAFEs SAFE Conversion Calculator Shares and ownership when a SAFE converts in a priced round. 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