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    Question

    Which of the following day-count convention is used to

    price bond market financial instruments in Indian bond market?
    A 30/360 Correct Answer Incorrect Answer
    B 30/365 Correct Answer Incorrect Answer
    C actual/365 Correct Answer Incorrect Answer
    D actual/360 Correct Answer Incorrect Answer
    E As specified by issuer at time of issue Correct Answer Incorrect Answer

    Solution

    Day count convention followed in Indian debt market o Money market: actual/365 i.e. that the actual number of days in a month is taken for number of days (numerator) whereas the number of days in a year is taken as 365 days; o Bond market: 30/360, which means that irrespective of the actual number of days in a month, the number of days in a month is taken as 30 and the number of days in a year is taken as 360

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