Back in 2001, I read something somewhere about I-bonds.  "Oh Boy," I said to myself, and ran out and bought five $1,000 I-bonds in July and August 2001. Dumb luck or good timing, it worked out nicely -- so far.  (I also bought VIPSX around the same time; that's a whole 'nother story.)

  I've always thought there's a lot of merit in the saying, "You shouldn't invest in anything you don't understand." In this case, I thought I understood what I was doing, but now I'm thinking maybe I don't.

  Here's the question:  The Savings Bond Wizard shows the "rate" on all five of these bonds as 6.11%.  (Sweet.)  However, it shows the "yield" as 5.64% for the 7/2001 bonds and 5.65% for the 8/2001 bonds. (Still pretty sweet.)

  I had assumed that the "rate" meant "base rate" -- that is, the rate from  which the interest rate is adjusted for inflation, which is designated, the "yield."  But if this is correct, it doesn't make sense that the yield would be lower than the rate -- even with minimal inflation, the yield would be greater than the (base?) "rate."

  This is really a trivia question, since I don't intend to do anything.  My initial $5,000 is now worth about $7,260, which by the 7th anniversay of these bonds will be a gain of about 50% (or better than 7% a year if my math is correct, always a real question).  That's not bad for an extremely safe investment.

  But I must confess I don't understand this "rate vs. yield" business.  If someone could explain this in a way suitable "for dummies," I'd be interested in learning.

   Thanks.