Buying Bonds - Who Pays the Interest? Part I

Who pays the interest when bonds are bought and sold? Good question. The answer is that the seller receives accrued interest up to the time the bond is sold. The interest is paid by the buyer. The buyer then is "reimbursed," so to speak, when the bond pays the interest.

To understand more fully, let's go through a specific example., As a caveat, let me emphasize that I do not recommend that investors buy individual bonds. I believe individuals should participate in the bond market by buying low cost exchange traded funds such as AGG, BND, LQD, etc.

That being said, let's begin by looking at a specific bond. You should begin by going to your discount broker's site and looking at their inventory. An alternative is to go to zions bank. Click "investments," "zions direct," "bond store."

You come to: CLICK TO ENLARGE


Note how I filled in the boxes. You, of course, would fill them in to your specs.






Among the bonds that came up was the following: CLICK TO ENLARGE