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You need a CPI for the next round of about 2.3%, given the 3 month penalty, for a 15 month return that would beat a 1 year CD at 4%.

Could you post your reasoning there? That sounds high to me, especially given the "extra" month of interest for an I-bond. If I purchase an I-bond on 11/30/05, I can redeem it on 11/1/06, right? I would get the interest from 12/05 to 8/06, six months at 6.73% (so a non-annualized return of 3.365%. I would then get three months interest at 1.0% + whatever the CPI adjustment is.

I would also get 4.0% interest for the month of 11/05.

Ignoring compounding for the moment, I figure that gets us to 3.70% return without even counting the three months post-high inflation adjustment. With a high state tax rate, you're already beating (or close to beating) a 4% 12-month CD even without counting on anything for those three months.

I think my reasoning is sound. Please let me know if it isn't.

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