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Your Money: Know how bond prices and coupons are calculated

Thus, for US Treasury bonds we use the Actual/Actual convention, whereas for Government bonds in India we use the 30/360 European method.By Sunil K. ParameswaranPlain vanilla bonds pay coupons every period. As we go from one coupon date to the next, with the passage of each day, one day’s worth of coupon gets accrued. This is termed as accrued interest. The way to perceive it is as follows. If a buyer buys a bond between two coupon dates, he will receive the entire coupon on the next coupon date. A pro-rata share of this coupon however belongs to the seller.Accrued…

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