Forecasting I-Bond earnings

[jollystomper]

Question about the above calculation. It appears the calculation is assuming the composite rate is paid every 6 months making the annualized rate twice that amount. Seems like every 6 months only 1/2 of the composite rate would be paid.

So I guess my question is wether the composite rates is an annualized rate or the actual 6 month rate? Or am I looking at the calculation totally wrong?

I'm inferring based on this paragraph from the website:
The interest is compounded semiannually. Every six months from the bond's issue date, all interest the bond has earned in previous months is in the bond's new principal value. Interest is earned on the new principal for the next six months. For example, in month seven, interest is earned on the original price plus six months of interest. In month 13, interest is earned on the original price plus 12 months of interest. (However, values displayed by the Savings Bond Calculator for bonds that are less than five years old do not include the latest three months of interest. These values reflect the interest penalty.) If you hold the bond for at least five years, when you cash in (redeem) the bond, you receive all the interest the bond has earned plus the amount you paid for the bond.

It's written about as clearly as every other gov't website... I wonder how that always happens. Anyway i won't be certain until 6/2/2022, but believe i have it right. It clearly does NOT say APR anywhere.

Here is an example from my May 2021 purchase of $10,000 worth of I Bonds.

At the time of purchase, the annual rate was 3.54%. That is the rate for the first 6 months. Note that you are credited with full interest for the month regardless on when in that month you purchased the bonds.

The six months were May thru October. In November, the value of my I bonds was displayed as $10,088. Since the annual rate is 3.54%, you receive 1.77% interest for that six months, which is $177. It does not display $10,177 because half of that is the three month interest penalty, $88.50 (it only displays whole numbers but this is not something I agonize over). So the displayed value is $10,088.

After the next six months (November through April), in May 2022, I expect the displayed value to be $10,358. The current annual rate of 7.12% is 3.56% interest on $10,177 for 6 months = $362, less the last three months interest = $181 additional on $10,177 = $10,358. There might be rounding considerations that make this off by a dollar, but not a concern to me.

 

[Bruceski44]

Here is an example from my May 2021 purchase of $10,000 worth of I Bonds.

At the time of purchase, the annual rate was 3.54%. That is the rate for the first 6 months. Note that you are credited with full interest for the month regardless on when in that month you purchased the bonds.

The six months were May thru October. In November, the value of my I bonds was displayed as $10,088. Since the annual rate is 3.54%, you receive 1.77% interest for that six months, which is $177. It does not display $10,177 because half of that is the three month interest penalty, $88.50 (it only displays whole numbers but this is not something I agonize over). So the displayed value is $10,088.

After the next six months (November through April), in May 2022, I expect the displayed value to be $10,358. The current annual rate of 7.12% is 3.56% interest on $10,177 for 6 months = $362, less the last three months interest = $181 additional on $10,177 = $10,358. There might be rounding considerations that make this off by a dollar, but not a concern to me.

Got it. Thanks!