§ 359.14 - How are composite rates determined?

§ 359.14 How are composite rates determined?

Composite rates are set according to the following formula (See appendix A to part 359 for examples of calculations involving composite interest rates.):

Composite rate = {(Fixed rate ÷ 2) + Semiannual inflation rate + [Semiannual inflation rate × (Fixed rate ÷ 2)]} × 2.^[2]

Footnotes - 359.14

^[2] Example for I bonds issued May 2002-October 2002:

Fixed rate = 2.00%

Inflation rate = 0.28%

Composite rate = [0.0200 ÷ 2 + 0.0028 + (0.0028 × 0.0200 ÷ 2)] × 2

Composite rate = [0.0100 + 0.0028 + 0.000028] × 2

Composite rate = 0.012828 × 2

Composite rate = 0.025656

Composite rate = 0.0257 (rounded)

Composite rate = 2.57% (rounded)