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I-bond advantages and disadvantages and the impact of inflation and deflation

Read "I-Bonds Adjust for Inflation"

1. What effect do you think the inflation-adjusted interest rate has on the price of an I-bond in comparison to similar bonds with no allowance for inflation?

2. What are some of the advantages and disadvantages of purchasing I-bonds over regular bonds?

3. What types of impacts to deflation and inflation have on I-bonds?


Solution Preview

Read "I-Bonds Adjust for Inflation"

The inflation-adjusted interest rate causes the I-bonds to be sold at face value. The additional interest will added to bond and paid at the time of redemption. Whereas, a regular is sold at less than face value and grows over the term of the bond.

An advantage of an I-bond is that the interest rate will adjust based on inflation changes. Also, the bond will rise along with inflation. Further, the interest rate consists of ...

Solution Summary

There are several advantages and disadvantages to the I-Bond. Also, there is an impact on the interest rate paid on an I-bond based on inflation or deflation.