If the interest rate on an I bond is 4.8% when I buy it. Is it always 4.8%?

Question

I bought a $1000 I bond in 2005. I think the interest rate was something like 5%. What does that mean? Does it stay 5% or does it fluctuate ?

Answer 1

Yes - the interest rate on a bond is fixed.

The way bonds fluctuate is the price of the bonds. In other words, if interest rates go to 10% the price of a bond paying 5% interest is discounted to make it competitive in the new market conditions.

For more information: http://www.investopedia.com/articles/bonds/07/pricing_conventions.asp
http://www.fool.com/bonds/bonds01.htm?terms=bonds&vstest=search_042607_linkdefault

Answer 2

No.
How is the earnings rate of an I Bond determined?
The earnings rate combines two separate rates:

A fixed rate of return, which remains the same throughout the life of the I Bond.
A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Public Debt announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.

Answer 3

always