Day count convention

useful for computation of accrued interest in debt markets.

Level - ADVANCE

For every bond trade, sellers are entitled to receive accrued interest for the broken period. This depends on day count convention applicable for the bond. Let's understand day count convention and how it works.

AUTHOR(S): Deepa Vasudevan

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What is Day count convention in the debt market

 For every bond trade, sellers are entitled to receive accrued interest for the broken period. This depends on day count convention applicable for the bond. Let's understand day count convention and how it works.

1 2 3 4 5

    1.The day count convention applicable to corporate bonds is



  • Actual/365
  • Actual/Actual
  • 30/365
  • 2.The day count convention applicable to money market instruments is



  • 30/365
  • Actual/Actual
  • Actual/365
  • 3.The calculation of broken period interest becomes relevant when



  • a bond is traded between coupon dates
  • a bond is traded at a discount to face value
  • a bond is traded on the last day of the month
  • 4.The day count convention applicable decides the number of days for which accrued interest is payable to



  • the trading exchange
  • the seller
  • the buyer
  • 5.The day count convention applicable to g-secs is



  • Actual/Actual
  • Actual/365
  • 30/365
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