If he were that kind of hands-on manager, this mess might not have happened in the first place.
The real risk-free rate is 4%. 1. The real risk-free rate is 4%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.
Today (3/22/2012) the interest rate on the EE series savings bond is 0.6%. There was no way that an interest rate of 0.6% could lead to doubling of the value of a bond in 20 years. In fact, the value of the bond would increase less than 15% over the 20 years. The effective interest rate on EE Series savings bonds had to be a lot more than 0.60%. Using semi-annual compounding over 20 years, a $1000 bond will become $2001.60 (double in value) with an interest rate of of 3.5%. How good is a 3.5% interest rate? The current interest rate on a 20 year treasury bond is 3.06%. The rate on the savings bond is 0.44% higher than the rate of the 20 Year Treasury bond. Given that US Savings Bonds are just as safe as the 20 year Treasury, getting almost a half-percent more yield is great. Once you include the tax benefits, EE series savings bonds are a much better investment than treasuries.