Understanding CD Earnings
A Certificate of Deposit (CD) is a savings product that offers a fixed interest rate for a specific term. Bank of America offers various CD terms with different interest rates, which can fluctuate based on market conditions and the length of the term you choose. When you invest in a CD, you agree to keep your money deposited for the entire term to earn the advertised Annual Percentage Yield (APY). Withdrawing funds before the maturity date typically incurs a penalty, which can reduce or eliminate your earned interest.
The calculation for CD earnings is based on compound interest. The formula used is: M = P (1 + r/n)^(nt)
- M = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit)
- r = the annual interest rate (as a decimal)
- n = the number of times that interest is compounded per year (for simplicity, we assume annual compounding, so n=1)
- t = the number of years the money is invested or borrowed for
Our calculator simplifies this by assuming interest is compounded annually for straightforward estimation. The result shown is the total interest earned, not the total balance.
function calculateCdEarnings() {
var principalAmount = parseFloat(document.getElementById("principalAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var termLengthYears = parseFloat(document.getElementById("termLengthYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(principalAmount) || isNaN(annualInterestRate) || isNaN(termLengthYears) ||
principalAmount <= 0 || annualInterestRate < 0 || termLengthYears <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var rateAsDecimal = annualInterestRate / 100;
var n = 1; // Assuming annual compounding for simplicity
// Formula for compound interest: M = P (1 + r/n)^(nt)
// We want to calculate the earnings, so Earnings = M – P
var futureValue = principalAmount * Math.pow((1 + rateAsDecimal / n), (n * termLengthYears));
var totalEarnings = futureValue – principalAmount;
if (totalEarnings < 0) {
resultDiv.innerHTML = "Calculation resulted in a loss. Please check your inputs.";
} else {
resultDiv.innerHTML = "
Estimated Total Interest Earned: $" + totalEarnings.toFixed(2) + "" +
"
Estimated Total Value at Maturity: $" + futureValue.toFixed(2) + "";
}
}
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