Home
Back
I Bond Composite Rate Formula:
| From: | To: |
The I Bond Interest Rate Calculator calculates the composite rate for Series I savings bonds, which combines a fixed rate that remains constant for the life of the bond with an inflation rate that adjusts semiannually.
The calculator uses the I Bond composite rate formula:
Where:
Explanation: The formula combines the fixed rate with twice the inflation rate plus their product to determine the total composite rate that the bond will earn over the next six months.
Details: Accurate composite rate calculation is essential for investors to understand the actual return on I Bonds, which are designed to protect against inflation while providing a guaranteed minimum return.
Tips: Enter the fixed rate and inflation rate as decimal values (e.g., 0.025 for 2.5%). Both values must be non-negative numbers.
Q1: What are I Bonds?
A: I Bonds are U.S. savings bonds that earn interest based on a combination of a fixed rate and an inflation rate, providing protection against inflation.
Q2: How often do I Bond rates change?
A: The fixed rate is set when you purchase the bond and remains constant. The inflation rate adjusts every six months based on the Consumer Price Index.
Q3: What is the typical range for I Bond rates?
A: Fixed rates typically range from 0% to 2%, while inflation rates vary with economic conditions. Composite rates can range from 0% to over 10% during high inflation periods.
Q4: Are there any restrictions on I Bonds?
A: Yes, I Bonds cannot be redeemed within the first year, and redeeming within five years results in a penalty of the last three months' interest.
Q5: How is the composite rate expressed?
A: The composite rate is typically expressed as an annual percentage rate, but the calculator provides it in decimal form for precise calculations.