Final answer:
The interest on fixed-rate municipal bonds is calculated using the day basis code 30/360, which assumes that every month has 30 days and a year has 360 days.
Step-by-step explanation:
The interest on fixed-rate municipal bonds is calculated using the day basis code a. 30/360. The 30/360 day count convention assumes that every month has 30 days and a year has 360 days. This method simplifies interest calculations by assuming a uniform number of days in each month and year.
For example, if the interest rate on a municipal bond is 3% and the bond has a face value of $10,000, the interest for one year would be calculated as follows:
Interest = (3% / 100) * $10,000 = $300