In a cash transaction for a Treasury bond, how many days of accrued interest are owed if settled on February 24th?

In a cash transaction for a Treasury bond, accrued interest is calculated from the last coupon payment date to the settlement date. Treasury bonds typically pay interest every six months, and the calculation of days typically follows the 30/360 method (assuming each month has 30 days and a year has 360 days) for most bonds, but the actual number of days between coupon payments needs to be taken into account.

For a Treasury bond with a coupon payment that was due before February 24th, let’s consider that the most recent coupon payment was on January 31st. To calculate the days of accrued interest owed as of the settlement date (February 24th), you would count the number of days from January 31st to February 24th.

There are 23 days from January 31st (not counting January 31 itself) to February 24th, plus the 30 days in January (since you look at the whole month for the purpose of a cash transaction). Therefore, adding the additional 30 days, you have a total of 23 days of accrued interest counted towards payment due at settlement.

The choice indicating 54 days reflects the correct method of counting the accrued interest from the coupon date, accounting for both the