Section

[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR351.2]

[Page 293-300]

TITLE 31--MONEY AND FINANCE: TREASURY

CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY

PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE--Table of Contents

Sec. 351.2 Description of bonds.

(a) General. Series EE bonds are issued only in registered form and
are nontransferable.
(b) Denominations and prices. Series EE bonds are issued on a
discount basis. The denominations and purchase prices are as follows:

Purchase
Denomination price

$50\1\...................................................... $25.00
75\1\....................................................... 37.50
100......................................................... 50.00
200......................................................... 100.00
500......................................................... 250.00
1,000....................................................... 500.00
5,000....................................................... 2,500.00
10,000...................................................... 5,000.00

\1\ As of October 1, 1990, $50 & $75 denominations were no longer
available through payroll savings plans or through employee thrift,
savings, vacation or similar plans.

(c) Term--original maturity periods for bonds issued prior to May 1,
1995. The issue date of a Series EE bond is the first day of the month
in which payment of the issue price is received by an authorized issuing
agent. Series EE bonds issued prior to May 1, 1995, have ``original''
maturity periods, also referred to as ``initial'' maturity periods, as
follows:

------------------------------------------------------------------------
Original maturity
Issue dates--1st day of: dates--1st day of: Original terms
------------------------------------------------------------------------
Jan. 1980-Oct. 1980............ Jan. 1991-Oct. 1991... 11 years.
Nov. 1980-Apr. 1981............ Nov. 1989-Apr. 1990... 9 years.
May. 1981-Oct. 1982............ May 1989-Oct. 1990.... 8 years.
Nov. 1982-Oct. 1986............ Nov. 1992-Oct. 1996... 10 years.
Nov. 1986-Feb. 1993............ Nov. 1998-Feb. 2005... 12 years.
Mar. 1993-Apr. 1995............ Mar. 2011-Apr. 2013... 18 years.
------------------------------------------------------------------------

[[Page 294]]

(d) Redemption. A Series EE bond may be redeemed after 6 months from
its issue date. The Secretary of the Treasury may not call Series EE
bonds for redemption prior to final maturity.
(e) Investment yield (interest) during original maturity periods--
bonds bearing issue dates of November 1, 1982 through April 1, 1995. The
investment yield of a Series EE bond bearing issue dates of November 1,
1982, through April 1, 1995, from its issue date to each interest
accrual date occurring less than 5 years after issue, will be as shown
in Tables 1, 2, and 3 in the appendix to this part.
(1) Guaranteed minimum investment yield. The guaranteed minimum
investment yield of a bond from its issue date to each semiannual
interest accrual date occurring on or after 5 years from issue up to
original maturity will be 7.5 percent per annum, compounded
semiannually, for a bond bearing an issue date of November 1, 1982,
through October 1, 1986, and 6 percent per annum, compounded
semiannually, for a bond bearing an issue date of November 1, 1986,
through February 1, 1993; and, 4 percent per annum, compounded
semiannually, for a bond bearing an issue date of March 1, 1993, through
April 1, 1995. Interest that accrues on a Series EE bond becomes part of
its redemption value and is paid, as set out in Sec. 351.2 (h).
(2) Market-based variable investment yield. If a Series EE bond is
not sooner redeemed, its yield 5 years after its issue date and on each
successive semiannual interest accrual date will be determined as
follows:
(i) For each 6-month period, starting with the period beginning on
May 1, 1982, the average market yield on outstanding marketable Treasury
securities with a remaining term to maturity of approximately 5 years
during such period will be determined.
(ii) For bonds bearing issue dates of November 1, 1982, through
April 1, 1989, the market-based variable investment yield from the issue
date of a bond to its semiannual interest accrual date 5 years
thereafter will be 85 percent, rounded to the nearest one-fourth of 1
percent, of the arithmetic average of the market yield averages for the
ten 6-month periods starting with the 6-month period that most recently
ended before such issue date.
(iii) For bonds bearing issue dates of May 1, 1989 through April 1,
1995, the market-based variable investment yield from the issue date to
the semiannual interest accrual date 5 years thereafter will be 85
percent, rounded to the nearest one-hundredth of 1 percent, of the
arithmetic average of the market yield averages for the ten 6-month
periods starting with the 6-month period that most recently ended before
such issue date.
(iv) In determining the market-based variable investment yield for a
bond from its issue date to each successive semiannual interest accrual
date occurring after 5 years from issue up to original maturity, the
average market yield for each additional 6-month period will be included
in the computation.
(v) The determination by the Secretary of the Treasury, or his
delegate, of the average market yields shall be final and conclusive.

Example. For bonds bearing issue dates of November 1, 1982, through
April 1, 1983, the market-based variable investment yield from issue
date to 5 years will be determined from the ten 6-month market yield
averages for the period from May 1, 1982, through April 30, 1987. The
market-based variable investment yield from issue to 5\1/2\ years will
be determined for the period from May 1, 1982, through October 31, 1987.
For bonds bearing issue dates of May 1, 1983, to October 1, 1983, the 5
year market-based variable investment yield will be determined for the
period from November 1, 1982, through October 31, 1987, and the 5\1/2\
year market-based variable investment yield will be determined from
November 1, 1982, through April 30, 1988. ln each case where a bond is
held for 5 years or longer during its original maturity period, its
redemption value on the appropriate interest accrual date will be
determined from such yield, unless the guaranteed minimum yield,
compounded semiannually, as specified in Sec. 351.2(e)(1), from issue to
that accrual date results in a higher redemption value.

(f) Investment yields (interest) during original maturity periods--
bonds issued prior to November 1, 1982. For bonds bearing issue dates of
January 1, 1980, through October 1, 1982, the investment yields shall be
as follows:
(1) Guaranteed minimum investment yield. The guaranteed minimum
investment yields on bonds bearing issue

[[Page 295]]

dates prior to November 1, 1982, are made available, on request, by the
Bureau of the Public Debt, Parkersburg, West Virginia 26106-1328.
(2) Market-based variable investment yield. If a bond is held for a
period of 5 years after its first semiannual interest accrual period,
occurring on or after November 1, 1982, its yield for such period, and
to each successive semiannual interest accrual date up to its original
maturity, shall be either the guaranteed minimum investment yield
specified above in paragraph (f)(1) of this section or the market-based
variable investment yield computed as provided in paragraph (e)(2) of
this section, whichever produces the greater value, using the
appropriate number of 6-month periods. The first such period began on
May 1, 1982.
(g) Extended maturity periods for bonds bearing issue dates prior to
May 1, 1995--(1) General. The terms extended maturity period, second
extended maturity period, and extended maturity, as used herein, refer
to periods after the original maturity dates of the bonds during which
owners may retain them at interest. No special action is required of
owners desiring to take advantage of any extensions herein granted.
(2) Extensions granted for bonds bearing issue dates prior to May 1,
1995. As described in the charts below, owners of Series EE bonds may
retain their bonds for an extended maturity period of l0 years. Owners
of Series EE bonds also may retain their bonds for a second extended
maturity period having a period such that, if outstanding, interest
shall accrue for a term totaling 30 years from the issue date. Each
Series EE bond will reach its final maturity and cease to accrue
interest 30 years after its issue date.

----------------------------------------------------------------------------------------------------------------
Original maturity Final maturity dates-- 1st day
Issues dates--1st day of: Original terms dates-day of: of:
----------------------------------------------------------------------------------------------------------------
Jan. 1980-Oct. 1980.............. 11 years............ Jan. 1991-Oct. 1991. Jan. 2010-Oct. 2010.
Nov. 1980-Apr. 1981.............. 9 years............. Nov. 1989-Apr. 1990. Nov. 2010-Apr. 2011.
May 1981-Oct. 1982............... 8 years............. May 1989-Oct. 1990.. May 2011-Oct. 2012.
Nov. 1982-Oct. 1986.............. 10 years............ Nov. 1992-Oct. 1996. Nov. 2012-Oct. 2016.
Nov. 1986-Feb. 1993.............. 12 years............ Nov. 1998-Feb. 2005. Nov. 2016-Feb. 2023.
Mar. 1993-Apr. 1995.............. 18 years............ Mar. 2011-Apr. 2013. Mar. 2023-Apr. 2025

----------------------------------------------------------------------------------------------------------------
Issues dates--1st day of: 1st extended Years to final Final maturity dates--
maturity dates--. maturity. 1st day of:
1st day of:*........

----------------------------------------------------------------------------------------------------------------
Jan. 1980-Oct. 1980.............. Jan. 2001-Oct. 2001. 9 years............. Jan. 2010-Oct. 2010.
Nov. 1980-Apr. 1981.............. Nov. 1999-Apr. 2000. 11 years............ Nov. 2010-Apr. 2011.
May 1981-Oct. 1982............... May 1999-Oct. 2000.. 12 years............ May 2011-Oct. 2012.
Nov. 1982-Oct. 1986.............. Nov. 2002-Oct. 2006. 10 years............ Nov. 2012-Oct. 2016.
Nov. 1986-Feb. 1993.............. Nov. 2008-Feb. 2015. 8 years............. Nov. 2016-Feb. 2023.
Mar. 1993-Apr. 1995.............. Mar. 2021-Apr. 2023. 2 years............. Mar. 2023-Apr. 2025
----------------------------------------------------------------------------------------------------------------
* At 10 years after original maturity.

(3) Determination of redemption values during any extended maturity
period for bonds bearing issue dates prior to May 1, 1995. The
redemption value of a bond on a given interest accrual date during an
extended maturity period or periods will be the higher of the value
produced using the applicable guaranteed minimum investment yield or the
value produced using the appropriate market-based variable investment
yield. The calculation of these yields and the resulting redemption
values are described below:
(i) Guaranteed minimum investment yield and resulting values during
an extended maturity period. A bond may be subject to one guaranteed
minimum investment yield during its original maturity period and to
another such yield during each of its extended maturity periods. Bonds
that entered an extended maturity period from May 1, 1989, through
February 1, 1993, have a guaranteed minimum investment yield of 6
percent per annum, compounded semiannually, during that extended
maturity period. Bonds that entered or enter an extended maturity period
on or after March 1, 1993, have a guaranteed minimum investment yield of
4

[[Page 296]]

percent per annum, compounded semiannually, during that extended
maturity period, or the guaranteed minimum investment yield in effect at
the beginning of that period. In order to determine values for a bond
during its first extended maturity period, the value of the bond at the
end of its original maturity period is determined using the guaranteed
minimum investment yield applicable to that period. This value is then
used as the base upon which interest accrues during the first extended
maturity period at the applicable guaranteed minimum investment yield
for that period. The value thus attained at first extended maturity (10
years after original maturity) is then used as the base upon which
interest accrues during the second extended maturity period at the
applicable guaranteed minimum investment yield for that period. The
resulting semiannual values are then compared with the corresponding
values determined using the applicable market-based variable investment
yields.
(ii) Market-based variable investment yield and resulting values
during an extended maturity period. For a bond beginning an extended
maturity period, the market-based variable investment yield from its
first semiannual interest accrual date occurring on or after November 1,
1982, or its issue date, whichever is later, to each semiannual interest
accrual date occurring on or after November 1, 1989, will be 85 percent,
rounded to the nearest one-hundredth of one percent, of the arithmetic
average of the market yield averages for the appropriate number of 6-
month periods involved, beginning with the period from May l, 1982, or
the 6-month period that most recently ended before the issue date,
whichever period occurs later. The value of a bond on its first
semiannual interest accrual date occurring on or after November l, l982,
or its issue date, whichever is later, is used as the base upon which
interest accrues during the extended maturity period at the applicable
market-based variable investment yield. As described above, the bond
will receive the higher of the two values produced using the applicable
market-based variable investment yield and guaranteed minimum investment
yield.
(h) Accrual and payment of interest for bonds issued prior to May 1,
1995. Interest accrues on a Series EE bond and becomes a part of the
redemption value which is paid when the bond is cashed. For bonds with
issue dates from January 1, 1980, through October 1, 1980, the
redemption value increases on the first day of each month from the third
through the thirtieth month after issue, and thereafter on the first day
of each successive 6-month period. For bonds with issue dates from
November 1, 1980, through October 1, 1986, the redemption value
increases on the first day of each month from the third through the
eighteenth month after issue, and thereafter on the first day of each
successive 6-month period. For bonds with issue dates from November 1,
1986, through February 1, 1993, the redemption values increase on the
first day of each month from the third through the thirtieth month after
issue, and thereafter on the first day of each successive 6-month
period. For bonds with issue dates of March 1, 1993 through April 1,
1995, the redemption values increase on the first day of each month from
the third through the sixtieth month after issue, and thereafter either
on the first day of each month or on the first day of each successive 6-
month period, whichever accrual schedule ensures that the actual yield
from issue date to redemption date is in no case less than 4 percent per
annum, compounded semiannually. The interest on an outstanding bond
ceases to accrue 30 years after its issue date.
(i) Tables of redemption values for bonds issued prior to May 1,
1995. For bonds with issue dates of November 1, 1982 through April 1,
1995, Tables 1, 2, and 3, in the appendix to this part, show the
established redemption values and investment yields for the first 4\1/2\
years after issue and redemption values produced by guaranteed minimum
investment yields from 5 years after issue to original maturity. For
bonds issued prior to November 1, 1982, tables showing the established
redemption values and investment yields for interest accrual dates
occurring less than 5 years from the first semiannual interest accrual
period starting on or after

[[Page 297]]

November 1, 1982, and the guaranteed minimum investment yields and
resulting redemption values for interest accrual dates occurring
thereafter to original maturity, are made available by the Bureau of the
Public Debt, Parkersburg, West Virginia 26106-1328. The market-based
variable investment yields for bonds redeemed during each 6-month
period, beginning on May 1 and November 1 of each year, are made
available prior to each of those dates by the Bureau of the Public Debt,
accompanied by tables of the redemption values of bonds for the
following 6 months, as determined by applicable market-based variable
investment yields or guaranteed minimum investment yields.
(j) Market-based interest rate and redemption values--bonds bearing
issue dates of May 1, 1995, through April 1, 1997. (1) The following
definitions apply for determining the interest rates and redemption
values for bonds bearing issue dates of May 1, 1995, through April 1,
1997:
(i) Market yields. Treasury uses market bid yields for bills, notes,
and bonds to create a yield curve based on the most actively traded
Treasury securities. This curve relates the yield on a security to its
time to maturity. Yields at particular points on the curve are referred
to as ``constant maturity yields'' and are determined by the Treasury
from this daily yield curve. The 6-month and 5-year Treasury securities
rates described below are derived from these yield curves.
(ii) Short-term savings bond rate. No less frequently than on each
May 1 and November 1, Treasury announces a short-term savings bond rate.
To determine this rate, Treasury compiles 6-month Treasury securities
rates as of the close of business for each day of the previous three
months and calculates the monthly average for each month, rounding each
monthly average to the nearest one-hundredth of one percent. The short-
term savings bond rate is then determined by taking 85 percent of the
three-month average and rounding the result to the nearest one-hundredth
of one percent. If the regularly scheduled date for the announcement
(for example, May 1) is a day when the Treasury is not open for
business, then the announcement is made on the next business day and is
effective as of the first day of that month. For bonds entitled to
interest accruals at the short-term savings bond rate, that rate applies
to the bond's first full semiannual interest accrual period following
each announcement of the rate.
(iii) Long-term savings bond rate. No less frequently than on each
May 1 and November 1, Treasury announces a long-term savings bond rate.
To determine this rate, Treasury compiles 5-year Treasury securities
rates as of the close of business for each day of the previous six
months and calculates the monthly average for each month, rounding each
monthly average to the nearest one-hundredth of one percent. The long-
term savings bond rate is then determined by taking 85 percent of the 6-
month average and rounding the result to the nearest one-hundredth of
one percent. If the regularly scheduled date for the announcement (for
example, May 1) is a day when the Treasury is not open for business,
then the announcement is made on the next business day and is effective
as of the first day of that month. For bonds entitled to interest
accruals at the long- term savings bond rate, that rate applies to the
bond's first full semiannual interest accrual period following each
announcement of the rate.
(iv) Base denomination. All redemption value calculations are
performed on a hypothetical denomination of $25 having a value at the
beginning of the first earning period equal to an issue price of $12.50.
Redemption values for bonds of greater denominations are in direct
proportion according to the ratio of denominations. For example, if the
value of a hypothetical $25 denomination is $26.80--i.e., $12.50 issue
price plus $14.30 accrued interest--on the same redemption date, the
value of a $50 bond bearing the same issue date is $26.80 x (50 / 25) or
$53.60.
(v) Issue date. The issue date of a Series EE bond is the first day
of the month in which payment of the issue price is received by an
authorized issuing agent.
(vi) Semiannual earning periods and accrual dates. Bonds bearing
issue dates of May 1, 1995, through April 1, 1997, earn interest during
each successive six

[[Page 298]]

month period from date of issue to final maturity. Interest accrues,
immediately following each earning period, on each semiannual
anniversary of the date of issue, including the date of final maturity.
(vii) Original maturity. Bonds reach original maturity at 17 years
after date of issue.
(viii) Final maturity. Bonds reach final maturity at 30 years after
date of issue. A bond ceases to earn interest at final maturity.
(2) Interest rates and redemption values for bonds held 5 years or
less. The interest rate for a Series EE bond bearing an issue date of
May 1, 1995, through April 1, 1997, for semiannual earning periods
during the first 5 years from date of issue, is the short-term savings
bond rate determined as defined in paragraph (j)(1)(ii) of this section.
Redemption values for semiannual accrual dates occurring on or before 5
years from date of issue are calculated in accordance with paragraph
(j)(5) of this section.
(3) Interest rates and redemption values for bonds held 5 years and
6 months and longer. The interest rate for a Series EE bond bearing an
issue date of May 1, 1995, through April 1, 1997, for semiannual earning
periods beginning 5 years from date of issue through original maturity,
is the long-term savings bond rate determined as defined in paragraph
(j)(1)(iii) of this section. Redemption values for semiannual accrual
dates occurring after 5 years from date of issue, through original
maturity, are calculated in accordance with paragraph (j)(5) of this
section, except that the redemption value at the date of original
maturity, as provided in paragraph (j)(1)(vii) of this section, shall
not be less than the denomination (face amount or face value).
(4) Interest rates and redemption values for bonds during an
extended maturity period. From 17 years after date of issue to the final
maturity date (the ``extended maturity period'') the bond will be
subject to the terms and conditions in effect when it is issued, and
will continue to earn interest as described in paragraph (j)(3) of this
section, unless the terms and conditions applicable to an extended
maturity period are expressly amended prior to the beginning of such
period.
(5) Redemption value calculations. Interest on a bond accrues and
becomes part of the redemption value which is paid when the bond is
cashed. The redemption value of a bond on the accrual date immediately
following each semiannual earning period is determined as follows:
(i) The applicable long-term or short-term savings bond rate for the
semiannual earning period is converted to decimal form by dividing by
100, and is adjusted to a semiannual rate by dividing by 2.
(ii) Using redemption values for the base denomination, as defined
in paragraph (j)(1)(iv) of this section, this rate is then multiplied by
the redemption value of the bond at the beginning of the semiannual
earning period.
(iii) The resulting interest amount, rounded to the nearest cent, is
added to the redemption value of the bond at the beginning of the
earning period to produce the redemption value at the next semiannual
accrual date. The redemption value of a bond remains constant between
accrual dates.
(6) The Secretary's determination. The determination by the
Secretary of the Treasury, or his delegate, of the market yields, and
the long-term and short-term savings bond rates, shall be final and
conclusive.
(7) Tables of redemption values. Tables of redemption value are made
available by the Bureau of the Public Debt, Parkersburg, West Virginia
26106-1328, prior to the periods during which the redemption values are
payable.
(k) Interest rate and redemption values--bonds bearing issue dates
of May 1, 1997, or thereafter.
(1) The following definitions apply for determining the interest
rates and redemption values for bonds bearing issue dates of May 1,
1997, or thereafter:
(i) Market yields. Treasury uses market bid yields for bills, notes,
and bonds to create a yield curve based on the most actively traded
Treasury securities. This curve relates the yield on a security to its
time to maturity. Yields at particular points on the curve are referred
to as ``constant maturity yields'' and are determined by the

[[Page 299]]

Treasury from this daily yield curve. The 5-year Treasury securities
yields described below are derived from these yield curves.
(ii) Savings bonds rate. No less frequently than on each May 1 and
November 1, Treasury announces a variable market-based savings bonds
rate. To determine this rate, Treasury compiles 5-year Treasury
securities yields as of the close of business for each day of the
previous six months and calculates the monthly average to the nearest
one-hundredth of one percent. The savings bonds rate is then determined
by taking 90 percent of the 6-month average and rounding the result to
the nearest one-hundredth of one percent. If the regularly scheduled
date for the announcement (for example, May 1) is a day when the
Treasury is not open for business, then the announcement is made on the
next business day, however, the effective date of the rate remains the
first day of the month of the announcement.
(iii) Base denomination. All redemption value calculations are
performed on a hypothetical denomination of $25 having a value at the
beginning of the first semiannual rate period equal to an issue price of
$12.50. Redemption values for bonds of greater denominations are in
direct proportion according to the ratio of denominations.
(iv) Issue date. The issue date of a Series EE savings bond is the
first day of the month in which payment of the issue price is received
by an authorized issuing agent.
(v) Accrual date. Interest on a Series EE savings bond accrues on
the first day of each month beginning with the fourth month from the
date of issue. The redemption value of a bond does not change between
these accrual dates.
(vi) Semiannual Rate Periods. Semiannual rate periods are the 6-
month periods beginning on the date of issue and on each semiannual
anniversary of the date of issue to original maturity.
(vii) Original maturity. Bonds reach original maturity at 17 years
after date of issue.
(viii) Final maturity. Bonds reach final maturity at 30 years after
the date of issue. Bonds cease to earn interest at final maturity.
(2) Interest rates and monthly accruals for bonds with issue dates
of May 1, 1997, or thereafter, through original maturity. Savings bonds
rates defined in paragraph (k)(1)(ii) of this section apply to earnings
during the first semiannual rate period beginning on or after the
effective date of the rate. Interest is credited on the first day of
each month and compounded semiannually. Interest accrues beginning with
the fourth month from the date of issue. For example, a bond issued in
January has interest first credited on May 1, which represents one month
of interest because of the 3-month interest penalty. The following table
shows, for any given month of issue with rates announced each May and
November, the months making up the semiannual rate period during which
interest is earned at the announced rate (disregarding the penalty for
bonds redeemed prior to 5 years after the date of issue) and the months
in which the bonds increase in value. This rate is an annual rate
compounded semiannually.

----------------------------------------------------------------------------------------------------------------
Then, semiannual
And rate rate periods in
If issue month is: announcement/ which interest is And bonds increase in value on
effective date is: earned include 1st day of months of:
months of:
----------------------------------------------------------------------------------------------------------------
JAN or JUL....................... May 1............... JUL through DEC..... AUG through JAN.
FEB or AUG....................... May 1............... AUG through JAN..... SEP through FEB.
MAR or SEP....................... May 1............... SEP through FEB..... OCT through MAR.
APR or OCT....................... May 1............... OCT through MAR..... NOV through APR.
MAY or NOV....................... May 1............... MAY through OCT..... JUN through NOV.
JUN or DEC....................... May 1............... JUN through NOV..... JUL through DEC.
JAN or JUL....................... November 1.......... JAN through JUN..... FEB through JUL.
FEB or AUG....................... November 1.......... FEB through JUL..... MAR through AUG.
MAR or SEP....................... November 1.......... MAR through AUG..... APR through SEP.
APR or OCT....................... November 1.......... APR through SEP..... MAY through OCT.
MAY or NOV....................... November 1.......... NOV through APR..... DEC through MAY.
JUN or DEC....................... November 1.......... DEC through MAY..... JAN through JUN.
----------------------------------------------------------------------------------------------------------------

[[Page 300]]

(3) Interest penalty for Series EE bonds with issue dates of May 1,
1997, or thereafter, redeemed less than 5 years following the issue
dates. If a Series EE savings bond with an issue date of May 1, 1997, or
thereafter, is redeemed less than five years following the date of
issue, the overall earning period from the date of issue will be reduced
by three months. For example, if a bond issued January 1, 1998, is
redeemed 9 months later on October 1, 1998, the redemption value will be
determined by applying the redemption value calculation formula
described in paragraph (k)(4) of this section and the savings bonds rate
for that bond at 6 months after the date of issue on July 1, 1998. The
redemption value of a bond subject to the 3-month interest penalty shall
not be reduced below the issue price. This penalty does not apply to
bonds redeemed 5 years or more after the date of issue.
(4) Redemption value calculations.
(i) Interest on a bond accrues and becomes part of the redemption
value which is paid when the bond is surrendered for payment. The
redemption value of a bond at original maturity shall not be less than
the face amount/denomination of the bond.
(ii)(A) The redemption value of a bond for the accrual date (the
first day of each month beginning with the fourth month from the date of
issue) is determined in accordance with this section and the following
formula:

FV = PV x {[1+(i / 2)]^(m/6)} where
FV (future value) = redemption value on redemption date rounded to the
nearest cent.
PV (present value) = redemption value at the beginning of the semiannual
rate period as defined in paragraph (k)(l)(vi) of this section.
i = savings bonds rate as defined in paragraph (k)(1)(ii) of this
section converted to decimal form by dividing by 100.
m = number of full calendar months outstanding during the semiannual
rate period.

(B) The following hypothetical example illustrates how this formula
is applied:

Example, assume a hypothetical savings bonds rate of 5.00% effective
May 1, 2002, for a bond denominated at $25, with an issue date of
September 1, 1997 and a redemption value of $16.00 as of September 1,
2002. The February 1, 2003, redemption value is calculated as follows:
Bonds issue dated in September have semiannual rate periods beginning
each March 1 and September 1. The first semiannual rate period to begin
on or after the effective date of the May 1, 2002, rate would be the
period beginning September 1, 2002. PV, the present value, would be the
value of the bond at the beginning of the semiannual rate period, on
September 1, 2002. The savings bonds rate of 5.00% converted to a
decimal would be 0.05. The number of months, m, is 5 since 5 full
calendar months (September through January) have lapsed since the
beginning of the rate period. FV is then the result of the formula:

FV = $16.00 x{ [1 + (0.05 / 2)]^(5/6)} = $16.33 after rounding
to the nearest cent.

Using the example, the FV of a savings bond with a $50 or larger
denomination can be determined by applying the appropriate multiple, for
example: $16.33 x ($50.00 / $25.00) for a bond with a $50.00 face
amount; or $16.33 x ($100.00 / $25.00) for a bond with a $100.00 face
amount.

(5) Interest rates and redemption values for bonds during an
extended maturity period. From 17 years after date of issue to the final
maturity date (the ``extended maturity period'') the bond will be
subject to the terms and conditions in effect when it is issued and will
continue to earn interest as described in paragraph (k)(2) of this
section, unless the terms and conditions applicable to an extended
maturity period are expressly amended prior to the beginning of such
period.
(6) The Secretary's determination. The determination by the
Secretary of the Treasury, or his delegate, of market yields, savings
bonds rates, rates applicable during any extended maturity period, and
savings bond redemption values shall be final and conclusive.
(7) Tables of redemption values. Tables of redemption values are
made available by the Bureau of the Public Debt, Parkersburg, West
Virginia 26106-1328. Redemption values published in such tables reflect
the 3-month interest penalty applied to bonds redeemed prior to 5 years
from the date of issue.

[55 FR 567, Jan. 5, 1990, as amended at 57 FR 14285, Apr. 17, 1992; 58
FR 60938, 60939, Nov. 18, 1993; 60 FR 15431, 15432, Mar. 23, 1995; 62 FR
24281, May 2, 1997]

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