How to Calculate I Bonds
Series I savings bonds are a popular alternative to the traditional Series EE bond. Like EE bonds, I bonds are available in paper form at banks and other financial institutions or as “electronic bonds” online. What makes I bonds distinctive is that they are linked to inflation.
This means that the interest rate is adjusted periodically (every 6 months) to offset inflation. I bonds are sold at face value starting at $25 and may be purchased by anyone with a Social Security number. Interest is added monthly to the principal of the bond.
Things You’ll Need
- I bond purchase date
- Inflation rate history
- Serial number
5 Steps to Calculate I Bonds
1. Find the fixed rate of the bond.
I bonds have a composite rate consisting of a fixed rate set when the bond is issued (purchased) and an inflation rate that is adjusted semi-annually. To locate the fixed rate for a particular I bond, check the rate history table published online.
2. Determine the initial inflation interest rate.
A complete inflation rate history table accompanies the fixed rate table at Treasury Direct. Multiply the listed (semi-annual) rate by two to find the annual rate and add it to the bond’s fixed rate. This is the composite rate in effect when the I bond was purchased.
For example, if the fixed rate is 1.40 percent and the semi-annual rate is 1.20 percent, the composite rate is 1.40 + (2 x 1.10), or 3.60 percent.
3. Divide the composite rate by 12 to find the monthly periodic rate.
If the composite rate is 3.60 percent, this is 3.60/12 equals 0.30 percent. Interest on I bonds is calculated and added to the principal monthly, so multiply the principal (this initially is the face value) by the monthly periodic rate and add the result to the principal to find the value of the I bond.
4. Repeat Step 3 for each month the inflation rate remained unchanged (this is normally a 6 month period but not always).
For each month’s calculation, use the principal balance obtained after adding the previous month’s interest to the bond.
5. Re-calculate the composite interest rate each time the inflation rate paid changes.
Then repeat Steps 3 and 4 until the inflation rate changes again or until you reach the current month. When you complete the calculation for the current month, you have found the current value of the bond.
As a practical matter, the way to calculate I bonds is to use the online calculators provided by Treasury Direct. You may need the serial number of a paper bond to use the calculator.
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