hi doma,
i don't really know how else to explain it. you are only confusing yourself by talking about bank accounts which are another poor analogy. bank savings accounts compound. a debt instrument of this type does not.
where a war bond pays simple interest on principle, in year one it pays interest of x% of the fixed total and in year two it pays the same amount. and in year three the same amount. and so on until the bond's issuer decides also to repay the principle. at which point, the issuer no longer pays the fixed rate of interest on the fixed amount of principle.
during the life of the war bond, the interest gets paid out. it does not get reinvested in the bond. that is unless it is the sort of instrument in which dividends accumulate. but these war bonds are not that type of instrument.
it's up to the bondholder whether and how they decide to invest the interest the bond pays out. but the interest does not accumulate in the bond. and so there is no compounding.
| 