SIE practice questioneasyAccrued Interest
How is accrued interest on a corporate bond calculated for a regular-way trade?
- ANo accrued interest is paid
- BActual/actual day-count convention
- CActual/365 day-count convention
- D30/360 day-count convention✓ Correct answer
Explanation
Why D — 30/360 day-count convention
Corporate bonds use the 30/360 method. U.S. Treasury securities use actual/actual. Accrued interest must be paid on interest-bearing bonds.
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