However, when you buy a bond, you must pay the seller not only the principal purchase price but also the interest that has accrued from the last interest payment date to the date you bought the bond. Conversely, when you sell a bond, the buyer must pay you the selling price and the accrued interest on your bond. The bond pays interest on January l and July l. The seller, who owned the bond up to April l is entitled to half of the interest payment. In this example, the seller calculates the interest for three months and adds it to the price of the bond.
Most bonds pay interest every six months.
In this example, the seller figures the interest for 69 days and adds it to the price of the bond. The corporation or other entity that issues the bonds is not responsible for determining what proportions of the interest is owed to the buyer or the seller. The seller or buyer must figure the accrued interest. The issuing company simply pays the interest to the registered owner or holder of the bond at the time the interest is due.