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FRM Part I · FRM Exam Part I · Interest Rate Futures

A corporate bond pays a 5% annual coupon semiannually, and uses the 30/360 day count convention. The last coupon date was 15 January and the settlement date is 15 April of the same year. What is the accrued interest per $100 face value?

Accrued interest is $1.25 per $100. Under 30/360, three months count as 90 days of a 360-day year, so accrued interest is 100 times 5% times 90/360. Using actual days over 365 or a full semiannual coupon would give a different, incorrect figure.

  1. A$0.6250
  2. B$1.2500Correct
  3. C$1.2329
  4. D$2.5000

Explanation

Under 30/360, 15 January to 15 April is 3 months = 90 days. Accrued interest = 100 x 5% x 90/360 = 1.25. The $0.6250 option uses 45 days. The $1.2329 option uses actual days over 365 (90/365), which is not 30/360. The $2.5000 option is a full semiannual coupon.

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