While receiving savings bonds as an annual Christmas or birthday present from Grandma may have seemed boring when you were a child, dust off those Series E bonds and add up the dough now.The last Series E bonds were issued in 1980. After that, they were replaced by Series EE bonds. Calculating interest on Series E bonds is complicated by the fact that their maturities have been extended several times, but at interest rates different than the original fixed rate. Keep in mind that Series E bonds will cease earning interest after 2010, so holding on to them just keeps your bank account thinner.
Look on the Series E bond for the issue date and the original interest rate. All Series E bonds were sold at 75 percent of face value. Multiply the face value by 75 percent to find the original principal or value. For example, a Series E bond with a face value of $1,000 had an original value of $750.
Find the semiannual rate of interest, which is one-half of the annual rates. Series bonds are compounded semiannually each May 1 and November 1. For example, if a bond worth $750 to start with originally earned 6 percent interest, the semiannual rate was 3 percent. For the first six month period, the interest was 3 percent of $750, or $22.50. Add the $22.50 to $750 for a new value of $772.50. For the second six months, the interest would be 3 percent of $772.50, or 23.17. The $23.17 is added to the principal.
Continue computing and adding interest semiannually at the original rate until the bond reaches maturity. Note that all Series E bonds retained their original rates at least through 1981.
Continue calculating and adding interest using the prevailing market rate established by the Treasury Department starting in 1982, or when the Series bond reached its original maturity, whichever was later. These market rates applied starting in 1982. You can find a complete rate history on the Treasury Direct website.
Use a 4 percent minimum annual rate for any period after March 1, 1993. At that time the 4 percent rate was established as a minimum and applies any time the market rate falls below 4 percent.
- To save time, you can use the Treasury Direct Paper Savings Bond Calculator (see Resources) to calculate the value of a Series E bond.
- Talk with a tax advisor if you plan to cash Series E bonds to pay for educational expenses. In some cases, the interest is tax free.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.