Question

A customer buys a new municipal issue from an underwriter on Wednesday, January 14th, with settlement taking place on Friday, January 16th. The bond is dated January 1st. How many days of accrued interest must be paid by the customer to the underwriter?

A. 0
B. 13
C. 15
D. 19

Answer 1

Answer:

(C) 15

Explanation:

Interest augments from the dated date on a new municipal issue up to, but not including the date when the first trade settles. Since settlement is on January 16th, interest augments through the 15th. Counting from the January 1st dated date through the 15th,15 days of augmented interest are payable from the customer to the underwriter.