2.10.3. Accrued Interest
Most bonds trade “and interest ,” which means their stated price includes any interest that has accrued on the bond from the time interest was last paid until the day before the settlement date. Most bonds pay interest every six months.
Accrued interest is added to the amount on the buyer’s sales confirmation because the buyer must pay the price of the security plus the added interest. Accrued interest is also added to the amount on the seller’s confirmation, because he receives the price of the security plus the accrued interest.
When calculating interest, a 30-day month and 360-day year are assumed for many but not all types of bonds. For example, a Treasury bond assumes the actual days of the month and the actual days in the year. The following table will help you when figuring accrued interest.
Bond Settlement and Accrual Conventions
Regular Way Settlement
Day Count Convention (month / year)
Corporate bonds
T + 2
30/360
MBSs, CMOs, CDOs*
T + 2
30/360
Municipal bonds
T + 2
30/360
Treasury bills
T + 1
Actual/360
Treasury bonds and notes
T + 1
Actual/Actual
*MBS = mortgage-backed securities; CMO = collateralized mortgage obligation; CDO = collateralized debt obligation
SUMMARY TABLE
Important
VIDEO
Since you're reading about Series 65: 2.10.3. Accrued Interest , you might also be interested in:
Please Enable Javascript to view this content!
TESTIMONIALS
What are people saying?
I passed the series 65 on my first attempt, thanks to the online quizzes & exams! The instant rationale feedback option really helped me think through the concepts. I highly recommend your testing material!
Ashley
Very good material and well
planned to help you pass the first time (Series 65). The audio tape
structure is easy to listen to along with the reading material. Clear and
to the point. Nothing dry about your material. Thank you. Highly recommend.
Carlos Acosta, GoldBox Wealth, San Antonio, TX
The material and
website were very well organized and thorough. I felt I was prepared for the
actual, real test when I took it because I had gone through their range of
questions with all the practice tests that I could do on their website,
covering every topic, approached with different angles.
Stacey Sperry, Durham, NC
I learned the material quickly and passed the Series 65 with flying colors. It was fun to listen while driving, and it was easy to absorb the information—just like being taught by an entertaining young professor!
Chris McConnell, Adondo Corporation, Wayne, PA
I took the exam three days after we spoke. I had to drive 75 miles to the test center. I finished the exam in a little under two hours and did not want to second guess myself in changing any of my answers. Upon completion of the exam, and subsequent grading I saw a 65 on the screen and I couldn't believe I did so poorly. However, the 65 I saw stood for the Series 65 not my grade and several lines below was my grade which was an 87. Thus I passed with a minimum amount of study looking over your online exam simulator. The questions were very similar to your review questions and I am sure that a candidate who reviews your questions and understands the application will have no problem passing the exam. Thanks for a great product.
Jeff Dampf
I successfully passed the test [Series 65] thanks to you guys!!!!
Chad Cook,
Old West Investment Management,
Los Angeles, CA
Read more reviews
Top