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Posted by Kirk Lindstrom Apr 24, 2006 |
Composite rate = [Fixed rate + (2 x Infl. rate) + (Fixed rate x Infl. rate)]
September Consumer Price Index - All Urban Consumers was 198.8.
March is 199.8
(199.8 - 198.8)/198.8 gives a semiannual inflation rate of .503%
Using the above formula for the Nov. 2005 I-bonds which had a fixed rate of 1% gives the new rate of 2% (depending on how the treasury rounds/truncates).
rate = .01 + (2*.005) + (.01*.005)
rate = .01 + (.01) + (.00005)
rate = .02 or 2%
So, I bonds purchased in the November 1, 2005 through April 30, 2006 window will pay about 2.0% for their next six month window.
Visit our I bond forum to read more and ask any questions about this calculation.
Thanks to runner26 for posting this calcuation here.