FRM Part I · FRM Exam Part I · Pricing Conventions, Discounting, and Arbitrage
A bond with face value 100 pays a 6% annual coupon in two semiannual installments on March 15 and September 15 and uses the 30/360 day count. A trade settles on June 15. What is the accrued interest per 100 of face value?
Accrued interest is 1.50 per 100. Under 30/360, March 15 to June 15 is 90 days, which is half of the 180-day coupon period. Half of the 3.00 semiannual coupon gives 1.50.
- A1.00
- B1.50Correct
- C3.00
- D0.75
Explanation
Under 30/360, March 15 to June 15 is 90 days. The semiannual coupon is 3.00 over a 180-day period, so accrued interest = 3.00 × 90/180 = 1.50. The 3.00 option wrongly treats the whole coupon as accrued. The 1.00 option uses only 60 days.
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