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The pay-in and pay-out dates for the settlement calendar is declared?
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∙ 12y ago
by the respective Stock Exchanges.
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∙ 12y ago
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Does interest start to accrue on purchase date or settlement date for bonds?
You are correct that the calculation of interest payments on bonds, asset-backed securities (ABS), mortgage-backed securities (MBS), and fixed-income securities often follows a settlement date approach. The settlement date approach is a common method used in financial markets to determine when interest payments are made to bondholders and investors. Here's how it works: Settlement Date: The settlement date is the date on which a financial transaction is completed, and ownership of the security is transferred from the seller to the buyer. It's also the date on which the purchase price is paid, and the security is delivered to the buyer. Accrued Interest: When a bond or fixed-income security is bought or sold between interest payment dates (coupon dates), the buyer typically pays the seller the accrued interest. Accrued interest is the interest that has accrued on the security since the last coupon payment date. Regular Coupon Payments: The issuer of the bond or security makes regular coupon payments to the bondholders on specified dates, typically semiannually or annually. These coupon payments are based on the nominal or face value of the security and the coupon rate. Adjustment at Settlement: When a security is bought or sold, the accrued interest is adjusted at the settlement date. The buyer compensates the seller for the accrued interest that has accumulated up to that point. Next Coupon Payment: After the settlement date, the new owner of the security is entitled to receive the next scheduled coupon payment in full, as they have compensated the seller for the accrued interest. The settlement date approach ensures that the buyer receives the full coupon payment for the period they hold the security, while the seller is compensated for the interest that accrued during their ownership. This approach is especially important in fixed-income markets because it provides a fair way to account for the interest payments between coupon dates, ensuring that both the buyer and seller receive their respective portions of the interest income based on their ownership periods. It also allows for a clear delineation of responsibilities regarding interest payments and accruals when securities change hands. It's worth noting that in some cases, the interest calculation method may vary depending on the specific terms and conventions outlined in the bond or security's prospectus or offering documents. Therefore, it's essential to refer to the specific terms of the security in question to understand how interest payments are calculated and when they are made.
When must you buy a stock in order to receive it's dividend?
When considering a dividend while purchasing securities there are several dates that are very important. These dates include the declaration date, ex-dividend date, record date, and payable date. First, lets define these dates...Declaration Date - The date on which the company declares it's dividendEx-Dividend Date - The date on which purchasing the security no longer includes it's dividendRecord Date - The date on which you must be registered on the company's books to still receive the dividendPayable Date - The date on which you actually receive the dividendAn Example of how these dates might look on a calendar:March 3rd declaration dateMarch 18th ex-dividend dateMarch 20th record dateApril 10th payable dateThe confusion and mistakes often occur when not accounting for settlement time on an investment. You do not own a stock on the company's books until your purchase has settled. When purchasing a stock, settlement starts on the trade date and takes three business days. Because of this fact the ex-dividend date (or first day stock trades without it's dividend) is two business days before the record date. This allows the stock that is purchased the day before the ex-dividend just enough time to settle on the record date entitling the investor to the dividend.On the other hand, an investor can sell a stock on the ex-dividend date and still be paid it's dividend regardless of if they own the stock on the day it's actually paid.For more information see Related Links for an explanation from the SEC
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