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Day count fraction: Difference between revisions
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Amwelladmin (talk | contribs) (Created page with "A means of calculating accrued interest for broken periods. Not to be confused with a Business day convention, a travelling salesman's conference which usually takes...") |
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a {{tag|day count fraction}}, actually*, is a means of calculating accrued [[interest]] for periods shorter than a year. Different currencies and different interest rates have different conventions. The Numerator designates the number of days in the interest period in question; the denominator the number of days in the year. The {{tag|day count fraction}} can then be multiplied by the notional amount and the interest rate to get the dollar amount of interest due. | |||
For example: | |||
*[[actual/actual]]: the actual number of days in the period divided by the actual number of days in the year (which will usually be 365, but may not be in a leap year) | |||
*[[actual/365]]: the actual number of days in the period divided by the 365 (ie taking no account of leap years and other ad hoc modifications to the duration of a given year) | |||
*[[30/360]]: Keen observers will note this fraction simplifies down to 1/12 - that is, a round month's worth of interest. Used mainly for fixed rates, where it doesn't really matter in which period a given day's worth of interest is paid, since it will be calculated exactly the same way anyway. | |||
Not to be confused with a [[Business day convention]], a travelling salesman's conference which usually takes place in Florida during the Hurricane Season. | Not to be confused with a [[Business day convention]], a travelling salesman's conference which usually takes place in Florida during the Hurricane Season. | ||
*see what I did there? | |||
{{isia}} | |||