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FRM Part I · FRM Exam Part I · Pricing Conventions, Discounting, and Arbitrage

Which day count convention is normally used to calculate accrued interest on U.S. corporate bonds?

U.S. corporate bonds normally use the 30/360 day count, treating each month as 30 days and the year as 360 days. Treasury bonds use Actual/Actual, and money market instruments typically use Actual/360.

  1. AActual/Actual
  2. B30/360Correct
  3. CActual/360
  4. DActual/365

Explanation

U.S. corporate bonds conventionally accrue interest on a 30/360 basis, where every month is treated as 30 days and the year as 360 days. Actual/Actual is used for U.S. Treasury notes and bonds, and Actual/360 is used mainly for money market instruments.

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