- 1). Determine the fixed and current inflation components of an I bond rate. The fixed rate is set at issue (the month you bought the bond) and remains the same until the bond matures. The semiannual inflation rate (based on the Urban Consumer Price Index) is adjusted every six months. You can find complete I bond rate histories at TreasuryDirect.gov (see References).
- 2). Convert the percentage fixed and semiannual inflation rates to their decimal equivalents by dividing the percentage rate by 100. For example, if the fixed or the inflation rate is 1.50 percent, divide by 100 to convert to the decimal equivalent of 0.0150.
- 3). Add the fixed rate to 2 times the semiannual inflation rate. Then multiply the semiannual inflation rate by the fixed rate and add in this amount to find the I bond rate. For example, if the fixed rate is 0.010 and the semiannual inflation rate is 0.015, you have 0.10 + 2(0.015) + (0.010 x 0.015) = 0.04015.
- 4). Multiply the I bond rate by 100 to convert back to a percentage. If the rate is 0.04015, this equals 4.015 percent. Round off to two digits to the right of the decimal to get 4.02 percent.
- 5). Discard a negative interest rate. In some cases the inflation is negative (called deflation) to the point you arrive at a negative interest rate for an I bond. In this case, the Treasury Department sets the rate at zero so that the principal value of your I bonds cannot be reduced.
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