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I-Bond Rate CalculationThe I-bond rate is calcualted using a combination of the fixed rate (currently 0.30%) and a semi-annual variable inflation rate (currently 1.53%). These together make the I-bond's interest rate.
This is how the composite rate for I-bonds issued from November 2009 through April 2010 was calculated:
Fixed rate = 0.30%
Semiannual inflation rate = 1.53%
Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = [0.0030 + (2 x 0.0153) + (0.0030 x 0.0153)]
Composite rate = [0.030 + 0.0306 + 0.0000459]
Composite rate = [0.0336459]
Composite rate = 0.0336
Composite rate = 3.36%
The 3.36% earnings rate for I-bonds purchasesd from November 2009 through April 2010 applies to their first six months after issue. The earnings rate combines a 0.30% fixed rate of return with the 3.06% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). When the inflation rate is less than zero, the I-bond's earnings rate will be less than its fixed rate, but the earnings rate is never less than zero.
Next: I Bond Tax Advantages
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