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You can use a rebate credit card to buy Ibonds until the end of 2003.

Exactly -- and that increases your yield for the 1st year. I have a card that pays 1% in cash back on purchases, so adding that to the already set 4.66% gives me 5.66% for the first year. That's hard to find in a bond these days -- without risk.

I know the interest rate changes in Nov. and May each year, but isn't that the inflation part of the rate only -- i.e., if I bought a bond today with a 4.66% yield, it would stay at 4.66% as long as I held the bond (up to 30 yrs.), but the inflation protection part of the yield would change each 6 mos, and that isn't paid out -- it is added to the principal of the bond and is paid out when the bond is cashed in.

How is the earnings rate of an I Bond determined?

The earnings rate of an I Bond is a combination of two separate rates: a fixed rate of return and a variable semiannual inflation rate. The fixed rate remains the same throughout the life of the I Bond, while the semiannual inflation rate can vary every six months.

The fixed rate of return is announced by the Treasury Department each May and November. The fixed rate of return announced in May of a given year is the same over the entire life of the I Bonds you purchase between May 1 and October 31 of that year. Likewise, the fixed rate of return announced in November of a given year applies to the entire life of I Bonds you purchase between November 1 and April 30 of the following year.

The semiannual inflation rate is also announced each May and November by the Treasury Department. The semiannual inflation rate is based on changes in the Consumer Price Index for all Urban consumers (CPI-U), which is reported by the Bureau of Labor Statistics. The semiannual inflation rate announced in May is a measure of inflation over the preceding October through March; the inflation rate announced in November is a measure of inflation over the preceding April through September.

The semiannual inflation rate is combined with the fixed rate of an I Bond to determine the I Bond's earnings rate for the next six months.

4. When are earnings added to the I Bond?

I Bonds increase in value each month, and interest is compounded semiannually. I Bonds increase in value on the first day of the month. An I Bond's issue date is the month and year when the full issue price is received by an I Bond issuing agent.

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