1. What is the US Series I Savings Bond?

The US Series I Savings Bond is a government-backed savings bond that earns interest based on both a fixed rate and an inflation rate. It's designed to protect investors from inflation while providing a guaranteed return.

2. How Does the Calculator Work?

The calculator uses the Series I Bond valuation 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 combines the fixed rate with twice the semiannual inflation rate plus their product, divided by 2, then compounds this rate semiannually over the holding period.

3. Importance of Bond Valuation

Details: Accurate bond valuation helps investors understand the current worth of their savings bonds, plan for future financial needs, and make informed investment decisions.

4. Using the Calculator

Tips: Enter 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 non-negative.

5. Frequently Asked Questions (FAQ)

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

Q2: How often do Series I Bonds compound interest?
A: Interest compounds semiannually, which is why the formula uses 2*y exponent.

Q3: What is the minimum holding period for Series I Bonds?
A: Minimum 1 year, with penalties for redemption within first 5 years.

Q4: Are there purchase limits for Series I Bonds?
A: Yes, currently $10,000 per person per year electronically, plus $5,000 in paper bonds via tax refund.

Q5: How are the inflation rates determined?
A: Based on the Consumer Price Index for All Urban Consumers (CPI-U) published by the Bureau of Labor Statistics.