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"Act/365" - Leap Years
What is the impact of leap year on the "Act/365", or "Actual/365" Day Count Convention?
✍: FYIcenter.com
If look at the Accrued Interest on your term deposit
in a leap year, you will see a higher amount than regular years.
Here is an example of a 5-year term deposit:
Principal: $1,000.00 Interest Method: Simple Interest Interest Frequency: 12 (Monthly) Interest Rate: 5.00% Day Count Convention: Act/365 Term: 5 years Start date: 2023-01-01 Maturity date: 2028-01-01
Here is how you can calculate the Accrued Interest in the date range of [T1,T2) = [2023-01-01, 2024-01-01), which is a regular year:
T1 = 2023-01-01: Starting date (inclusive) T2 = 2024-01-01: Ending date (exclusive) of the Accrual Range T3 = 2023-02-01: Ending date (exclusive) of the Accrual Period T4 = 2028-01-01: Ending date (exclusive) of the Accrual Year DiR(T1,T2) = DiR(T1,T2) = Calendar_Days(T1,T2) = 365 DiY(T1,T2) = 365 Day_Count_Factor(T1,T2) = DiR(T1,T2) / DiY(T1,T2) = 365 / 365 = 1.0 Accrued_Interest = Principal × Interest_Rate × Day_Count_Factor = $1,000.00 × 5.0% × 1.0 = $50.00
Now let's see Accrued Interest in another date range of [T1,T2) = [2024-01-01, 2025-01-01), which is a leap year:
T1 = 2024-01-01: Starting date (inclusive) T2 = 2025-01-01: Ending date (exclusive) of the Accrual Range T3 = 2024-02-01: Ending date (exclusive) of the Accrual Period T4 = 2028-01-01: Ending date (exclusive) of the Accrual Year DiR(T1,T2) = DiR(T1,T2) = Calendar_Days(T1,T2) = 366 DiY(T1,T2) = 365 Day_Count_Factor(T1,T2) = DiR(T1,T2) / DiY(T1,T2) = 366 / 365 = 1.0027397260274 Accrued_Interest = Principal × Interest_Rate × Day_Count_Factor = $1,000.00 × 5.0% × 1.0027397260274 = $50.13698630137 = $50.14
So you earn an extra interest of $0.14 on a leap year.
⇒ "Act/365" - Daily Compound Interest
⇐ "Act/365" - Cross-Period Accrual
2026-02-04, ∼151🔥, 0💬
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