I thought I had this topic/math issue down but then I saw the following. I come up with 95 days (15 for Jan, 30 for Feb, 30 for Mar and 20 for April) But the correct answer is supposedly 96. Trade settles on Tuesday 21st. What am I doing wrong?
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This one is a bit tricky, @Accurate_lime_rodent. It’s a corporate bond, so we assume 30 days in each month. January is where you’re a bit off. There are actually 16 days of accrued interest in January. If you count from January 15th through the 30th, you’ll find 16 days to count for accrued interest. It’s bit tough to conceptualize, so I’ll demonstrate it below:
January 15th - 1
January 16th - 2
January 17th - 3
January 18th - 4
January 19th - 5
January 20th - 6
January 21st - 7
January 22nd - 8
January 23rd - 9
January 24th - 10
January 25th - 11
January 26th - 12
January 27th - 13
January 28th - 14
January 29th - 15
January 30th - 16
The counting is a bit off because January 15th counts as an accrued interest day. It will always work this way when the payment days are mid-month.
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