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Author: Aida2003 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Advise for RothIRA & 401k, please Date: 10/5/2003 7:37 PM
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To ImCalvin (Ben): Well, I am unfortunate to admit that I didn't get a correct answer when I applied your explained explanation to my I Bonds.
Maybe you could indicate where I'm making a mistake, please... I bought iBonds of $1k at the end of April, 2003. 11/1/2002 fixed rate was 1.6% and the inflation rate was 1.23%. Even if I bought the bond at the end of April, shouldn't I still accumulate interest for 1 month?
My calculation is the following:

$1,000 * 0.235833% = $2.36 (interest for April)

On May 1,2003 fixed rate was 1.10% and inflation rate was 1.77%.

1.77%+1.1%=2.87%/12 months = 0.239167% * 5months = 1.195833%
$1,000 * 1.195833% = $11.96

So, the total accrued interest would be $2.36+$11.96=$14.32
What mistake did I make? I am sure there is one, because the calculator on the Treasury website says that I've earned as of today only 10 dollars on the iBond.

Also, can someone explain me what's the point to proclaim that iBond's current rate is 4.66% (through Oct 2003) when in fact people earn only 2.87% (1.10%fixed + 1.77% inflation)?
Why do they even bother to show how the composite rates are set (http://www.publicdebt.treas.gov/sav/sbirate2.htm) if they do not pay such an interest on the iBonds anyway?

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