New member question about bonds

[trexndiane]

Hi,

I have some Series EE savings bonds and I noticed that they have different interest rates. For example:

Purchase date: Interest rate:
04/01 4.11%
09/01 2.74%

My question: Why is there such a jump in the interest rate? Is it solely because of the date?

What makes the interest rate change?

Thank you for your assistance.

trexndiane
trexndiane@cs.com

 

[cute fuzzy bunny]

The rates on EE's are set at the time they're sold. IIRC rates were being cut drastically in 2001 to help stimulate the economy and help pump up the lousy stock market. Hence the big drop between the bonds bought in april and the ones bought in september.

 

[clifp]

Your 9/01 bonds can be cashed in with no penalty (there is a 5 year period where an interest penalty applies to saving bonds.) Given the low rates you'd almost certainly be better cashing the EE savings bonds in a putting the money CD or possibly in stock fund if you are willing to take more risk. If you have any plans for enrolling in college courses there are some special tax benefits with EE, but they are of course a few hitches.