Expert: Steve Hach - 5/16/2009

Question
My question is this. I have emailed the Treasury people. They tell me my bonds I bought in 1993,(Oct) EE bonds I paid 25 dollors for then at the end of ten years they would be worth face value of 50.00? The bonds are now 15 years old and they tell me they are not even worth face value$46.32. I thought that once a bond earned interest they could not take it away. Which we both know the interest rate was more then today rate.
The treasureary people tells me that they have not ever had 7 year bonds which I know is wrong. I want to know when they changed the rules and why? I have spoke with 3 supervisers.
They told me that this is how it has been and my bonds wont be mature until I have held them for 18 years.
That is not what I was told when I bought them. Could you help me?

Answer
Hi Terri,

Thanks for the question.


All the information you need is available at the Treasury Web site.

A bond interest calculator is here:

http://www.treasurydirect.gov/BC/SBCPrice

Using your info, that calculator says the bond is worth 47.92$

You paid 25$ for them and they are now worth almost double.  They are also rock solid/safe investments.  You have NOT lost money, you have gained 22.92$

Furthermore, if you go here:

http://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eeratesa...

You find the following info on your series of bond--


Guaranteed Minimum Rates

Guaranteed minimum rates were set at the time a bond was issued. Initially, they apply to a bond's original maturity period and are subject to change as a bond enters an extended maturity period. In its extended maturity period, the bond's guaranteed minimum rate becomes the minimum in effect at that time for new issues. The guaranteed minimum rates are:

   * 4% for bonds issued March 1993 - April 1995
   * 4% for bonds entering an extended maturity period since March 1993
   * 6% for bonds issued or entering an extended maturity period between November 1986- February 1993
   * 7.5% for bonds issued or extended from November 1982-October 1986

Market-Based Rates

Market-based rates are based on the 5-year U.S. Treasury securities yields calculated each May 1 and November 1. The market-based savings bond rate is set at 85% of the average of these yields for the applicable earning periods. You'll find a more detailed explanation, and a table of the applicable 5-year Treasury yields in Market-Based Rates.

Bonds Issued March 1993 through April 1995

   * Have a guaranteed minimum rate of 4% per year, compounded semiannually
   * Have an original maturity period of 18 years
   * Once held for five years, they became eligible for market-based rates.




The original bond should have "matured" --doubled-- in 18 years.  Not 10 years.  To mature in only 10 years you would have had to receive @7% interest rate. Also, I find no record of any 7 year bonds.  I can assure you that the treasury people are not lying to you and that you must have misunderstood the original terms of the bonds.  Yes, rates were higher then, but you made your interest at exactly the rate you were promised and are right in line to double your money in two years.

I do not see your complaint.  You have almost doubled your money at no risk.

Many people that bought homes or stocks have recently lost 30-60-75% on their investments!

Bonds pay less interest overall in exchange for total safety.

If you are looking for quick money, bonds are not the best bet, but I suggest you remember that you only paid 25$ and you now have almost 50$ that is totally safe and secure.

I think you must have heard the info wrong initially.

Best,

Steve

PS
In the future, I recommend using google and the Internets for questions like these.  It's faster.