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

A US Treasury bond with a 6% annual coupon paid semiannually (each coupon is 3 per 100 of face value) last paid on January 15 and next pays on July 15 (181 days in the period). The year is not a leap year. Settlement is March 15. What is the accrued interest on 100,000 face value?

Accrued interest is $977.90. Treasuries use actual/actual, so 59 days have elapsed out of 181 in the coupon period, and the semiannual coupon of $3,000 is multiplied by 59/181. Using 30/360 would give $1,000, which is wrong for Treasuries.

  1. A$969.86
  2. B$977.90Correct
  3. C$983.33
  4. D$1,000.00

Explanation

Treasuries use actual/actual. Days from Jan 15 to Mar 15 = 16 + 28 + 15 = 59, out of 181 in the coupon period. Accrued = 3,000 × 59/181 = $977.90. The $1,000 option wrongly uses 30/360 (60/180), a convention used for corporate bonds.

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