A savings bond is a treasury value for investors. In essence, investors are lending money to the government. They are issued in both paper and electronic savings bonds. They cannot be exchanged, but can be redeemed after only one year. There are no dividends, per se, with a savings bond, since the interest payments simply add to the value of the bond, but as tax-deferred items, the interest does not have to be reported to the government until the bonds are cashed.
The value of a savings bond varies depending on the type of bond purchased: series A, B, C, D, E, EE, F, G, H, HH, I, J and K. It also depends on when it is cashed and what interest rate has been assigned. Since 1935, the Treasury has issued savings bonds in alphabetical progression. For example, Series A bonds were offered the first year, Series B bonds followed in 1936, Series C was issued between 1937 and 1938, and Series D was issued between 1939 and 1941. Series E, the longest-duration Treasury savings bond, ran from May 1941 until it was discontinued in 1980.
Series EE bonds were issued in 1980 to replace series E bonds. They can be purchased at half or full face value. They come in amounts between $50 and $10,000 and have a maturity date of between eight and thirty years. Those collected before the fifth year are penalized with three months of interest.
If EE Bonds are purchased through a bank or other financial institution, they are also known as Patriot Bonds. There were more types of savings bonds, including series F and G (offered to all investors except banks), series H, HH, series I, J, and K.
How do we calculate the value?
The value of a savings bond can be calculated by noting the face value of the bond, the interest rate from the time the bond was issued to the present time, and whether there are any penalties that need to be deducted. Also, it is important to note that a bond that is issued at half face value will be worth face value at maturity, while a bond that is issued at face value is worth twice this amount at maturity. Savings Bonds may also increase in value if redeemed after their maturity date, in which case the interest must be calculated on a year-to-year basis.