1. What is Savings Bond Interest?

Savings bond interest represents the earnings accumulated on government-issued savings bonds over time. It's calculated as the difference between the bond's face value (maturity value) and its purchase price.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Interest earned ($)
• \( FV \) — Face value of the bond ($)
• \( PV \) — Purchase price of the bond ($)

Explanation: This formula calculates the total interest earned by subtracting the original purchase price from the bond's face value at maturity.

3. Importance of Interest Calculation

Details: Calculating savings bond interest helps investors understand their investment returns, plan for future financial goals, and make informed decisions about bond purchases and redemptions.

4. Using the Calculator

Tips: Enter the bond's face value and purchase price in dollars. Both values must be positive, and the face value should be greater than or equal to the purchase price for valid results.

5. Frequently Asked Questions (FAQ)

Q1: What types of savings bonds use this calculation?
A: This calculation applies to Series EE and Series I savings bonds, where interest is the difference between purchase price and redemption value.

Q2: Is this the actual interest rate or total interest earned?
A: This calculates total interest earned over the bond's lifetime, not the annual interest rate.

Q3: How often is interest compounded on savings bonds?
A: Series EE bonds compound interest semiannually, while Series I bonds compound monthly.

Q4: Are there tax advantages to savings bonds?
A: Yes, interest from savings bonds is exempt from state and local taxes, and federal taxes can be deferred until redemption.

Q5: What happens if I redeem a bond before maturity?
A: Early redemption may result in receiving less than the full face value, depending on the bond's terms and how long you've held it.