Reply to Please explain how I Bonds accrue interest

Forum Index » Money and Finances

Reply to "Please explain how I Bonds accrue interest"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous]Maybe I'm missing something about the question. I bonds are variable rate zero coupon. In other words, you don't get the interest payment until you cash out and the interest rate changes regularly and depends on how long you hold it. As PP point out, if you hold it for less than 5 years, you forfeit the last 3 months of interest. So if you bought in December, TreasuryDirect will only display today's value after accounting for the interest forfeiture. Once you hold an I bond for 5 years, TreasuryDirect stops deducting the 3 month interest forfeiture when displaying its value.

Also, while interest on an I bond is calculated monthly, it is only compounded semi-annually. So it won't be until June that the interest from the first 6 months is added to your principal for future monthly interest calculations. But, the interest accrual added will be for all of the first 6 months. So you get less benefit from compounding than what you would get from monthly compounding, but that is separate from the 3 month interest forfeiture. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics