FRM Part I · FRM Exam Part I · Interest Rate Futures
Which of the following correctly matches an instrument type with the day count convention normally used in the US market to calculate its accrued interest or quoted price?
US Treasury bonds use Actual/Actual for accrued interest. Corporate bonds use 30/360 and T-bills and other money market instruments use Actual/360, so only the Treasury bond with Actual/Actual pairing is correct.
- AUS Treasury bonds: Actual/ActualCorrect
- BUS Treasury bonds: 30/360
- CUS corporate bonds: Actual/Actual
- DUS Treasury bills: 30/360
Explanation
US Treasury bonds accrue interest on an Actual/Actual basis. US corporate and municipal bonds use 30/360, and money market instruments such as T-bills use Actual/360. So the Treasury bond pairing is the only correct one.
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