SIE (Securities Industry Essentials) Practice Exam

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On what calendar basis is the computation of dollar prices and accrued interest on municipal bonds normally based?

  1. 365/365

  2. 30/360

  3. Actual/Actual

  4. 30/365

The correct answer is: 30/360

Municipal bonds typically use the 30/360 calendar basis for calculating dollar prices and accrued interest, as opposed to the other options listed. This calendar basis assumes a 360-day year and 30-day months for computation purposes. The 365/365 and 30/365 options would be used for calculations on corporate bonds. The Actual/Actual option is typically used for Treasury bonds. Therefore, option B is the most appropriate choice for municipal bonds.

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