Practice Quiz

FINRA Series 7

Category - Series 7

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Bubba Corporation issued bonds that pay interest on January 15 and July 15 each year until maturity. An investor purchasing these bonds on Monday, April 12, must pay the contract price plus accrued interest for:
  1. 87 days
  2. 89 days
  3. 93 days
  4. 90 days
Explanation
Answer: D - 90 days. Interest accrues from the coupon date to the settlement date. A regular way purchase on April 12 will settle on April 15. corporate bonds are figures on 30-day months, regardless of the actual number of days in the month. The year is considered 360 days. Therefore interest is calculated for 16 days in January plus 30 each for February and March plus 14 for April.
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