I Bond Calculator Interest

I Bond Interest Formula:

\[ \text{Interest} = V - P \] \[ V = P \times \left(1 + \frac{\text{fixed} + 2 \times \text{inflation} + \text{fixed} \times \text{inflation}}{2}\right)^{2 \times y} \]

Purchase Amount (P):

USD

Fixed Annual Rate (fixed):

decimal

Semiannual Inflation Rate (inflation):

decimal

Years Held (y):

years

Current Value (V):

Interest Earned:

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1. What is the I Bond Interest Calculator?

The I Bond Interest Calculator calculates the interest earned on Series I Savings Bonds based on the composite rate formula. It helps investors understand the potential return on their I Bond investments.

2. How Does the Calculator Work?

The calculator uses the I Bond interest formula:

\[ \text{Interest} = V - P \] \[ V = P \times \left(1 + \frac{\text{fixed} + 2 \times \text{inflation} + \text{fixed} \times \text{inflation}}{2}\right)^{2 \times y} \]

Where:

\( P \) — Purchase amount (USD)
\( \text{fixed} \) — Fixed annual rate (decimal)
\( \text{inflation} \) — Semiannual inflation rate (decimal)
\( y \) — Years held (years)
\( V \) — Current value (USD)

Explanation: The formula combines the fixed rate with twice the semiannual inflation rate to calculate the composite rate, which compounds semiannually.

3. Understanding Series I Bonds

Details: Series I Bonds are U.S. government savings bonds that earn interest based on a combination of a fixed rate and an inflation rate. The composite rate changes every six months based on inflation.

4. Using the Calculator

Tips: Enter the purchase amount in USD, fixed annual rate as a decimal (e.g., 0.025 for 2.5%), semiannual inflation rate as a decimal, and years held. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What are the current I Bond rates?
A: Current rates are announced by the Treasury Department each May and November. Check TreasuryDirect.gov for the latest rates.

Q2: How often does the inflation rate change?
A: The inflation component changes every six months, in May and November, based on the Consumer Price Index.

Q3: Are there any restrictions on I Bonds?
A: Yes, I Bonds have a minimum holding period of 1 year and early redemption penalties if cashed within 5 years.

Q4: How is the composite rate calculated?
A: Composite rate = fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate)

Q5: Are I Bond earnings taxable?
A: Yes, I Bond interest is subject to federal income tax but exempt from state and local income taxes.