Question : What determines the interest rate on I bonds?
I am thinking about purchasing my new great niece an I bond for her birthday for $100. I know the interest rate now until May is like 4.7 %. What determines the interest rate in the I bond? Does the Feds raising and lowering the interest rate have any affect on the return? This I bond I plan to purchase will be for her future education.
- asked by happydawg
All Answers:
Answer #1
the interest is in two pieces. The CPI + a fixedinterest rate.The CPI is determined each yearbased on the amount of inflation (rise in pricesof typical goods and services). The fixed rate isdetermined by supply and demand in the treasurymarket at the time of purchase. For example, thecurrent 4.7% may be due to a fixed 2% and acurrent inflation rate of 2.7%. Over the courseof time, the fixed rate will stay the same, andthe CPI will fluctuate. Seewww.treasurydirect.gov for precise information onthis.
- answered by jshref
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