1. What is the Savings Bond Calculator?

The Savings Bond Calculator determines the future value of a bond investment based on its face value, interest rate, and number of compounding periods. It helps investors understand how their savings bonds will grow over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( Face \) — Initial bond value (USD)
• \( Rate \) — Periodic interest rate (as decimal)
• \( Periods \) — Number of compounding periods

Explanation: The formula calculates how an initial investment grows with compound interest over multiple periods.

3. Importance of Bond Valuation

Details: Understanding bond valuation helps investors make informed decisions about their savings and compare different investment options.

4. Using the Calculator

Tips: Enter the bond's face value in USD, annual interest rate as a percentage, and the number of compounding periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest includes interest on previously earned interest.

Q2: How often do savings bonds typically compound?
A: Most savings bonds compound semiannually (twice per year), but this can vary by bond type.

Q3: Are savings bond earnings taxable?
A: In most cases, yes. Interest earned on savings bonds is generally subject to federal income tax.

Q4: Can I lose money on a savings bond?
A: Traditional savings bonds are designed to not lose face value, but inflation can erode purchasing power.

Q5: What's the minimum investment for savings bonds?
A: For U.S. Series EE bonds, the minimum purchase is $25 when bought electronically.