Savings Bonds For many years, the U.S. Treasury has issued savings bonds, starting with Series A...

  

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Savings Bonds For many years, the U.S. Treasury has issued savings bonds, starting with Series A in 1935 and continuing through Series EE (available now). These bonds have been considered a safe, reliable investment. Many families have used savings bonds as a tax-exempt way to save money for a child's education.¹ Until fairly recently, savings bonds were issued in paper form, and the owners were responsible for keeping them in a safe place until they were ready to redeem them (cash them in). Now, the government only issues electronic savings bonds. Starting at the date of purchase, a savings bond begins earning interest at a fixed rate,² compounded semiannually (twice a year). When the savings bond reaches its face value, it is said to mature. The bond may continue to earn interest for up to 30 years. One of the novelties of a paper EE savings bond was that it was purchased at half of its face value. For example, a $50 savings bond was purchased for $25. In the next in- class activity, we will study how long it would take a paper EE savings bond to mature. 2) In 1995, a woman purchased a savings bond for her granddaughter's education. She paid $500 for the bond, which earned 7% interest, compounded semiannually. How much was the bond worth 18 years later, when her granddaughter graduated from high school? Had the bond matured? Hint: A mature bond is double the initial investment. Savings Bonds For many years, the U.S. Treasury has issued savings bonds, starting with Series A in 1935 and continuing through Series EE (available now). These bonds have been considered a safe, reliable investment. Many families have used savings bonds as a tax-exempt way to save money for a child's education.¹ Until fairly recently, savings bonds were issued in paper form, and the owners were responsible for keeping them in a safe place until they were ready to redeem them (cash them in). Now, the government only issues electronic savings bonds. Starting at the date of purchase, a savings bond begins earning interest at a fixed rate,² compounded semiannually (twice a year). When the savings bond reaches its face value, it is said to mature. The bond may continue to earn interest for up to 30 years. One of the novelties of a paper EE savings bond was that it was purchased at half of its face value. For example, a $50 savings bond was purchased for $25. In the next in- class activity, we will study how long it would take a paper EE savings bond to mature. 2) In 1995, a woman purchased a savings bond for her granddaughter's education. She paid $500 for the bond, which earned 7% interest, compounded semiannually. How much was the bond worth 18 years later, when her granddaughter graduated from high school? Had the bond matured? Hint: A mature bond is double the initial investment.

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