@CPAlmost sorry i didnt see this post until now
“Thanks Ssbknyc, but I'm still a bit confused. You said “At the interest payment date the investor will pay the total accrued interest for the period LESS the accrued interest that was already paid when they bought the bond”. So the investor pay twice? Once for the accrued interest when they buy the bond and again on the interest payment date? Did you mean that at the interest payment date the investor will RECEIVE the interest less accrued?”
To clarify, the investor does pay interest twice 1) Accrued interest between interest payment dates when you purchase the bond and 2) when its the interest payment date, however, you already paid a portion of the accrued interest when you purchased the bond so you will not pay interest on the full interest payment period.
Lets say there is a bond DATED Jan 1 and the interest is paid semiannually but you dont purchase it until April 1, the investor pays the price of the bond plus the accrued interest calculated for the first three months (Jan through March)
Now the first interest payment is due July 1, you are not going to pay interest on the first 6 months because you already paid accrued interest from Jan through March.
So how i approach the question is to calculate the interest paid for the full interest period (6 months) and subtract the accrued interest you already paid when you purchase the bond, which is accrued interest for the first 3 months of the 6 month interest period.
Hope its not too confusing, i tried to keep it as simple as possible
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