1. What is the TreasuryDirect Savings Bond Formula?

The TreasuryDirect savings bond formula calculates the current value of a savings bond based on its face value, annual yield rate, and years held. This method accounts for semiannual compounding of interest.

2. How Does the Calculator Work?

The calculator uses the TreasuryDirect formula:

Where:

• \( Face\ Value \) — Original bond value (USD)
• \( Rate \) — Annual yield rate (decimal form)
• \( Years \) — Time bond has been held (years)

Explanation: The formula accounts for semiannual compounding by dividing the annual rate by 2 and doubling the number of compounding periods.

3. Importance of Bond Valuation

Details: Accurate bond valuation is crucial for financial planning, tax reporting, and understanding investment growth over time.

4. Using the Calculator

Tips: Enter face value in USD, annual yield as a decimal (e.g., 0.05 for 5%), and years held. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does the formula divide the rate by 2?
A: This accounts for semiannual compounding, where interest is applied twice per year.

Q2: What's the difference between face value and current value?
A: Face value is the original bond amount, while current value includes all accrued interest.

Q3: How often does the interest compound?
A: Interest on Treasury savings bonds compounds semiannually (every 6 months).

Q4: Can I use this for bonds that have reached maturity?
A: No, this calculator is for bonds still earning interest. Matured bonds stop earning additional interest.

Q5: Are there tax implications for bond interest?
A: Yes, bond interest is subject to federal tax, but exempt from state and local taxes.