What is the Definition of 30/360?

30/360

Noun

Definition: An interest rate accrual method in which the interest calculation assumes that all 12 months of a calendar year have 30 days and uses a 360-day year. An Actual/360 interest calculation charges interest for all 365 calendar days using a 360-day year. Therefore, borrowers pay 5 days less interest than under Actual/360. The Actual/360 interest calculation produces an effective interest rate that is 12 basis points higher than that produced by the 30/360 interest calculation.

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