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Appendix C
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Extended Bond Calculations
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Computing Time to Maturity
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(Using Traditional Trade Custom)
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Time to maturity for calculation of basis prices is computed in years,
months and days. The time from settlement date to the next coupon date
is always the remainder of the coupon period after calculation of time
for accrued interest. For example, if accrued interest is for 3 months
and 17 days, time to the next coupon date would be 2 months, 13 days.
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In computing time to maturity, the 31st of a month is always considered
the same as the first of the following month. For example, if the
settlement date is 11 /15/72 and maturity is on 1/1/81, the time to maturity is 8 years, 1 month and 15 days.
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Calculation of Time for Accrued Interest
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Accrued interest on bonds is to be added to principal—computed for
elapsed months and days on a 360-day year basis. In this computation a
month is considered to be 1/12th
of 360 days, or 30 days, and each period from a date in one month to
the same date in the following month shall be considered to be 30 days.
In the calculation, the first day of the accrual period should be
counted, and the last or settlement date omitted.
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The number of elapsed days should be computed in accordance with the examples given below:
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1st to the 30th of the same month is figured as 29 days
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1st to the 31st of the same month is figured as 30 days
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1st to the 1st of the following month is figured as 30 days
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1st to the 28th of February is figured as 27 days
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Where interest is payable on the 30th or 31st of the month:
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30th or 31st to the 1st of the following month is figured as 1 day
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30th or 31st to the 30th of the following month is figured as 30 days
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30th or 31st to the 31st of the following month is figured as 30 days
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