Actual365Fixed

Actual365Fixed, also written Actual/365 Fixed or A/365 Fixed, is a day count convention used in the calculation of interest on loans, bonds, and derivatives. It computes the year fraction as the actual number of days in the accrual period divided by a fixed 365-day year. The denominator remains 365 irrespective of leap years, so when the accrual period includes February 29, the numerator is 366 for that period, producing a slightly larger year fraction than 1.0.

Used in a variety of financial instruments and markets, Actual365Fixed provides a simple and stable basis for interest accruals, especially where a 365-day year is standard. Because the denominator does not adjust for leap years, the convention can lead to different interest amounts compared with other conventions that use 360 or 366-day years.

Calculation example: for a loan with annual rate r, the interest over a period of d actual days is Interest = Principal × r × (d/365). For a 30-day period, that would be Principal × r × 30/365.

Relationship to other conventions: Actual/365 Fixed contrasts with Actual/360 (year fraction = d/360) and with Actual/Actual, where the denominator depends on the calendar year and sometimes the claim is split across years. The choice of convention affects accrued interest, payment schedules, and valuations.

See also: Day count convention; Actual/360; Actual/Actual.