Accrued Interest on Government and Agency Securities

What this video covers

• Why a buyer pays accrued interest to a seller at settlement, and how the buyer is fully reimbursed by collecting the next full coupon
• The exact securities bucketed under the 30/360 day-count convention: agency debt, mortgage-backed securities (MBS), collateralized mortgage obligations (CMOs), corporate bonds, and municipal bonds
• Why Treasury notes and Treasury bonds use actual/actual day count instead, and how this precision trap is the exam's favorite outlier
• How to calculate accrued interest under 30/360 (30-day months, 360-day year) versus actual/actual (exact calendar days elapsed over exact days in coupon period)
• The zero-accrued-interest rule on Treasury bills (T-bills), and why their status as discount instruments with no coupon means nothing can accrue
• How the test writers deliberately place Treasury securities against memorized 30/360 defaults to bait wrong answers
• The settlement mechanics "up to but not including" the settlement date, and why neither party is shortchanged in the exchange