1. What is the I Bond Composite Rate?

The I Bond composite rate represents the total earnings rate for Series I Savings Bonds, combining a fixed rate that remains constant for the bond's life with a variable inflation rate that adjusts semiannually.

2. How Does the Calculator Work?

The calculator uses the I Bond composite rate formula:

Where:

• \( fixed \) — Fixed rate component (decimal)
• \( inflation \) — Inflation rate component (decimal)

Explanation: The formula combines the fixed rate with twice the inflation rate plus their product to determine the total composite rate.

3. Importance of Composite Rate Calculation

Details: Accurate composite rate calculation is essential for investors to understand their potential returns from I Bonds, which are designed to protect against inflation while providing a guaranteed real return.

4. Using the Calculator

Tips: Enter both fixed rate and inflation rate as decimal values (e.g., 0.025 for 2.5%). Both values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What are I Bonds?
A: I Bonds are U.S. Treasury savings bonds that earn interest based on both a fixed rate and an inflation rate, providing protection against inflation.

Q2: How often do inflation rates change?
A: Inflation rates for I Bonds are adjusted every six months, in May and November, based on the Consumer Price Index.

Q3: What is the typical range for fixed rates?
A: Fixed rates typically range from 0% to 3%, depending on market conditions and Treasury Department decisions.

Q4: Are there any limitations to I Bonds?
A: I Bonds have annual purchase limits, must be held for at least one year, and early redemption penalties apply if cashed within five years.

Q5: How is the composite rate applied?
A: The composite rate is applied semiannually and compounds every six months for the life of the bond.