Ch. 2 accrued interest calculations

trading flat

a term used to describe a situation in which a bond trades without accrued interest. Zero coupon bonds, as well as income bonds trade flat.

corporate and municipal bonds

accrued interest is calculated from the last interest payment date up to but not including the settlement date.

dated dates

for a new bond issue, the date from which interest accrual begins

notes

most bonds trade and interest, meaning a buyer pays a seller a bond's market price, plus accrued interest since the last payment The buyer receives the full amount of the interest payment, including interest that accrued while the seller owned the bond.

coupon dates

payment dates

Accrued 360 day year

principal x interest x elapsed days divided 360 days = accrued bond interest.

Accrued interest calculations

two methods, the 30 day month (360 day year) corporate and municipal bonds . actual calendar days (365 day year) us government bonds.

Accrued 365 day year pg 83

use actual days, april 30 days may 31 days june 30 days july 31 days august 15 days.