110:The rates on the current series of EE bonds is fixed at 3.2% and are purchased for half of their face value, a $1000. EE Bond would cost $500. The interest rate is guarenteed for 20 years. The Treasury can set a new rate for the last 10 years of the bond's 30 year life. Therefore, it's not completely possible to calculate the final value after 30 years.The Fixed rate of an I-Bond is set for the 30 year life of the bond at the rate in effect at the time of purchase, currently 1%. This rate never changes which has caused the I-Bond to lose favor as an investment. The variable component of the I-Bond is based on the CPIU and is reset every 6 months on May 1 and November 1. This is currently 5.73% which is added to the fixed rate to give a composite yield of 6.73%. Remember that except when redeemed because of major natural disasters, Savings Bonds can't be redeemed for one year after purchase. Also, if you redeem them prior to 5 years, there is a 3-month interest penalty. They are intended as a long range investment.This makes it very questionable as to whether or not EE are a viable investment vehicle if inflation should accelerate. The I-Bond is better, but I still would like to see the fixed rate increased. At this time, short term CD's of 1 year might be a better place to park funds because they don't incur the 3-month interest penalty when they mature in one year and by then there may be a clearer picture as to whether I-Bonds have become attractive again. Just my opinion, but I know that the Fool Community has smart enough people to present you with good alternatives. DM
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