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Savings Bonds Formula:
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The Ustreasury.Gov Savings Bonds Calculator calculates the current value of savings bonds based on the purchase amount, annual interest rate, and years held. This formula reflects the semi-annual compounding used by U.S. Treasury savings bonds.
The calculator uses the savings bonds formula:
Where:
Explanation: The formula accounts for semi-annual compounding, where interest is applied twice per year, making investments grow faster than simple annual compounding.
Details: Accurate savings bonds valuation helps investors understand the growth of their government-backed investments, plan for future financial needs, and compare investment options.
Tips: Enter purchase amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and years held. All values must be valid (purchase amount > 0, rate ≥ 0, years ≥ 0).
Q1: What types of savings bonds use this formula?
A: This formula applies to Series EE and Series I savings bonds that compound interest semi-annually, as offered by the U.S. Treasury.
Q2: How does semi-annual compounding differ from annual compounding?
A: Semi-annual compounding applies interest twice per year, resulting in slightly higher returns than annual compounding due to more frequent interest application.
Q3: What is the minimum investment for U.S. savings bonds?
A: The minimum purchase amount for electronic savings bonds is $25, while paper bonds have different minimum requirements depending on the series.
Q4: Are savings bonds taxable?
A: Interest earned on savings bonds is subject to federal income tax but exempt from state and local income taxes, making them tax-advantaged investments.
Q5: Can savings bonds be redeemed before maturity?
A: Yes, but there's typically a minimum holding period (1 year for most bonds) and early redemption may result in losing the last 3 months of interest.