Composite rates are set according to the following formula (See appendix A to part 359 for examples of calculations involving composite interest rates.):
Code of Federal Regulations
Composite rate = {(Fixed rate ÷ 2) Semiannual inflation rate [Semiannual inflation rate × (Fixed rate ÷ 2)]} × 2. 2
Code of Federal Regulations
Footnote(s):
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)