1. What is the I Bonds Composite Rate?

The I Bonds composite rate is the total interest rate earned on Series I savings bonds, combining a fixed rate that remains constant for the bond's life with a variable inflation rate that adjusts semiannually based on the Consumer Price Index.

2. How Does the Calculator Work?

The calculator uses the I Bonds composite rate formula:

Where:

• \( Fixed \) — Fixed interest rate (decimal)
• \( Inflation \) — Semiannual inflation rate (decimal)
• \( Composite \) — Total composite interest rate (decimal)

Explanation: The formula combines the fixed rate with twice the inflation rate plus their product to determine the total return on I Bonds.

3. Importance of Composite Rate Calculation

Details: Calculating the composite rate helps investors understand their potential return on I Bonds, which are designed to protect against inflation while providing a guaranteed minimum return.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What are I Bonds?
A: I Bonds are U.S. savings bonds that earn interest based on both a fixed rate and an inflation rate, offering 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 minimum investment for I Bonds?
A: The minimum electronic purchase is $25, while paper bonds can be purchased for $50, $75, $100, $200, $500, $1,000, or $5,000.

Q4: Are there any restrictions on I Bonds?
A: I Bonds must be held for at least one year, and redeeming within five years results in a penalty of the last three months' interest.

Q5: How are I Bonds taxed?
A: I Bonds are exempt from state and local taxes, and federal taxes can be deferred until redemption or maturity.