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I Bonds Composite Rate Formula:
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The I Bonds composite rate is the total interest rate earned on US Series I Savings Bonds, combining a fixed rate that remains constant for the bond's life and an inflation-adjusted rate that changes semiannually based on the Consumer Price Index.
The calculator uses the I Bonds composite rate formula:
Where:
Explanation: The formula combines the fixed rate with twice the inflation rate plus their product to calculate the total composite interest rate for I Bonds.
Details: Accurate composite rate calculation helps investors understand their potential returns from I Bonds, which offer inflation protection and are considered one of the safest investments backed by the US government.
Tips: Enter the fixed rate and inflation rate as decimal values (e.g., 0.025 for 2.5%). Both values must be non-negative numbers.
Q1: How often does the inflation rate change for I Bonds?
A: The inflation rate component is adjusted semiannually in May and November based on the Consumer Price Index for All Urban Consumers (CPI-U).
Q2: What is the typical range for I Bond rates?
A: Fixed rates typically range from 0% to 2-3%, while composite rates can vary significantly based on inflation, sometimes reaching 5-9% during high inflation periods.
Q3: Are there any limitations on I Bond purchases?
A: Yes, there are annual purchase limits ($10,000 per person per year electronically, plus $5,000 in paper bonds via tax refund).
Q4: What is the minimum holding period for I Bonds?
A: I Bonds must be held for at least 1 year, and if redeemed within 5 years, you forfeit the last 3 months of interest.
Q5: How is the composite rate expressed to investors?
A: The composite rate is typically expressed as an annual percentage rate, though it's actually a combination of fixed and variable components.