-1
$\begingroup$

The convention says that when computing with rates, $1$ year has $360$ days. Does this mean that, when computing with rates, $1$ year has $360$ normal days or 1 day is $\frac{365 \times 24}{360} = 24.33$ hours long?

I hope it is clear, tell me if my question is confusing.

$\endgroup$
1
$\begingroup$

When the convention is ACT/360, it means that 365 calendar days of interest is calculated as 365/360 years. I knows it seems stupid, but before industrial use of computers, it was convenient for a year to be a nice round number like 360.

I forget how the 30/360 convention is handled - I once coded up all the conventions, but they have worked really well for me and I don't remember what they all mean!

Try this reference:

https://developers.opengamma.com/quantitative-research/Interest-Rate-Instruments-and-Market-Conventions.pdf

$\endgroup$
  • $\begingroup$ Hours are never considered in interest payment calculations; the shortest period to borrow/lend money is 1 day. $\endgroup$ – noob2 May 10 '17 at 23:45
  • $\begingroup$ @noob2 - yes - closest thing I can think of that is an intraday loan is a tri-party repo arrangement, but I have never had to get down and dirty with that kind of nuanced business. $\endgroup$ – FinanceGuyThatCantCode May 10 '17 at 23:50
  • $\begingroup$ What I wanted to know was that: Suppose that today is 01/01/2017 and I get a loan that I have to pay in 1 "year"; when do I need to pay the loan? If a "year" was 360 days long, each day of 24 hours, then I would have to pay it on 12/26/17. But if a "year" was 360 "days" long, each "day" of 24.33 hours, then I would have to pay it on 01/01/2017. $\endgroup$ – Lay González May 10 '17 at 23:58
  • $\begingroup$ Yeah, it is clear now. If I want to get a loan with a rate stated in "years" (of 360 days) and pay it in a year (of 365 days), then I need to pay amount * (1 + rate * 365/360), as stated by FGTCC. All that could be deduced if I was told that a "year" has 360 days of 24 hours. $\endgroup$ – Lay González May 11 '17 at 0:14

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.