Composite rates are set according to the following formula (See appendix A to part 359 for examples of calculations involving composite interest rates.): Composite rate = {(Fixed rate / 2) + Semiannual inflation rate +
[Semiannual inflation rate x (Fixed rate / 2)]{time} x 2. \2\---------------------------------------------------------------------------
\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 x 0.0200 / 2)] x2
Composite rate = [0.0100 + 0.0028 + 0.000028] x2
Composite rate = 0.012828 x 2
Composite rate = 0.025656
Composite rate = 0.0257 (rounded)
Composite rate = 2.57% (rounded)---------------------------------------------------------------------------