Day counting

[Hend Abuenein]

Hi,

What is the FASTEST way to do day count comparisons?
I find this time consuming and tedious.

Example question :

If identical coupon payments are paid on March 1 and September 1 , would corporate bonds accrue more interest from March 1 to September 1, than a T bond from September 1 to March 1 ?

It would take me about 5 minutes to count days, apply conventions and compare!
Is there a FAST way to do this?

 

[David Harper CFA FRM]

Hi Hend,

Not only can't i answer this question quickly, in my opinion, this question is lame.

Actually, my first answer is (to the question) is: technically, no, because over the full period, they both accrue the full coupon (it is asking about accrual over the full period, isn't it?)

If not that, then at first glance it appears the corporate bond must accrue more rapidly as the corporate bond initially accrues at, if d = number of days since last coupon, d * 1/180, which must be greater (in the first 30 days) than the T-bond which accrues at d*1/182; i.e., for d < 30, d/180 > d/182. But this is not necessarily the case after 30 days; e.g., at May 1st compared to Nov 1st, I get 61/182 > 60/180. At this point, I conclude the question doesn't even know what it is asking.

So, I don't see a good question here ... as i look at it, I am unclear exactly what it means to comparatively "accrue more interest" ... I hope that helps, David

 

[Hend Abuenein]

Thanks
It's lame alright

 

[Skewed]

Hi, im sure not if anyone else figured this out , but i did a quick search on youtube and found this which works.

If the years are not given i take 00's

 

[David Harper CFA FRM]

Hi @Skewed oh wow, huge. I did not know about this. Thank you, thank you!!! Always learning something new. We will share this helpful tip in the "Week in Risk"!!

 

[Abiola]

This was very helpful!

 

[Ruchi91]

Thanks, @Skewed for this. It's quicker and easier.