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URL:  http://boards.fool.com/does-this-equation-take-into-account-the-interest-15952544.aspx

Subject:  Re: EE/E series bond Date:  10/18/2001  10:06 PM
Author:  foobar73 Number:  2243 of 35576

Does this equation take into account the interest added to the original amount invested every six months? For some reason, I thought you had to account for the biannual accrurals. Am I trying to make this too complicated? It just seems like with a YTD of 5.74% there would be more than $108.39 in interest in 30 years.

I believe the YTD includes the effect of compounding, since this is the measured yield on the bonds. If you were working from the actual interest RATE (not YIELD), then you would need to adjust for compounding as you suspected. The difference between the two is small enough that you can typically ignore it for estimation purposes. For example, a rate of 5.74% compounded semiannually gives (1+0.0574/2)^2=1.0582, or a yield