1. What Are I Bonds?

I Bonds (Inflation-Indexed Savings Bonds) are U.S. Treasury securities that earn interest based on both a fixed rate and an inflation rate. They are designed to protect investors from inflation while providing a guaranteed return.

2. How Does the Calculator Work?

The calculator uses the I Bond value formula:

Where:

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

Explanation: The formula accounts for the combined effect of the fixed rate and inflation rate, compounded semiannually over the holding period.

3. Importance of I Bond Calculation

Details: Accurate I Bond valuation helps investors understand the real return on their investment, accounting for inflation protection and the fixed interest component.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What are the current I Bond rates?
A: Rates are announced every May and November. Check TreasuryDirect.gov for current fixed and inflation rates.

Q2: How often is interest compounded?
A: I Bonds compound interest semiannually, which is why the exponent is 2*y in the formula.

Q3: Are there any restrictions on I Bonds?
A: Yes, you must hold I Bonds for at least 1 year, and if redeemed before 5 years, you lose the last 3 months of interest.

Q4: What is the maximum purchase amount?
A: The annual purchase limit is $10,000 per Social Security number for electronic bonds, plus $5,000 in paper bonds via tax refund.

Q5: Are I Bonds taxable?
A: Federal income tax applies, but state and local taxes are exempt. You can defer taxes until redemption or maturity.