Q. Could you please comment on the new EE Savings Bonds rate change? Would it be better to buy now before the new rules, which fix the interest rate permanently for the life of the bond, go into effect? Historically, what has the average rate been for the last 30 years as a basis of comparison?

---N.R., by e-mail


A. Sorry, it's too late to buy under the old rules. Beginning May 1 new EE Savings Bonds have a single yield through the life of the bond, which is 20 years plus a 10-year extension, or 30 years. If the bonds are held for 20 years the Treasury also guarantees that the initial value of your bond will at least double. This implies a minimum 20-year yield of 3.75 percent.

Not exactly Fat City.

If interest rates and inflation rise over the next 20 years this change will save the U.S. government a great deal of money at the expense of those who don't ask the kind of questions you just asked. According to research by the Leuthold Group in Minneapolis, yields on 20-year U.S. Treasury bonds have ranged from 3.2 percent to 15.0 percent with a median yield of 6.77 percent and an average yield of 7.03 percent from 1957 to the present.

As before, the yield on the bonds will change each May and November--- but the yield will then will remain fixed to maturity. If we are at the beginning of a long rise in interest rates, those who buy these new issues will be tempted to redeem their old, low yield bonds for new higher yield bonds. The good news is that they won't suffer any loss on that redemption beyond the three-month interest penalty for bonds redeemed before five years. That will make these securities a safer investment than publicly traded bonds. The bad news is that redeeming bonds means the accumulated interest income will become taxable.



Q. When a person wins a lottery and takes a one-time lump sum payment, what happens with the difference/penalty money?   Example: a Rowlett family won a $112 million jackpot recently. They took a lump sum of $68.2 million instead. Where does the $43.8 million go?

---B.J., by e-mail from Plano, TX


A. It never existed. In most state lotteries you don't win a million dollars today. You win $50,000 a year for 20 years. That's not the same thing as a million dollars today because you can put aside less than a million dollars today and provide someone with $50,000 a year for twenty years.

How much less?

It all depends on what money earns in interest while it is "waiting." The higher the interest rate, the lower the number of dollars that need to be put aside today. If you want to have $1,000 in 12 years, for instance, you only need to put aside $500 today if your money will earn 6 percent. (We're not considering taxes.)

That $112 million jackpot wasn't really $112 million today. It was 'only' $5.6 million a year for 20 years. If you put aside $68.2 million today and it earned 5.275 percent it would provide $5.6 million a year for 20 years, a total of $112 million.

If the Securities and Exchange Commission supervised state lotteries, winnings could not be presented in the way that they are because it would be considered dishonest and misleading.

The typical state lottery skims 50 percent of revenue off the top and redistributes 50 percent back to participants. The winners then pay income taxes on what they have won. In Las Vegas casinos, the glamorous and legitimized descendents of organized crime, the casinos' take, or "vig," runs from a high of around 13 percent on the slot machines to 2 percent or less at the Blackjack, Baccarat, and Craps tables. The casinos then pay plenty of taxes on the billions they take in. Makes you wonder if organized government doesn't pick up where organized crime left off.