This calculator helps you estimate the earnings on a Certificate of Deposit (CD) with a fixed annual interest rate of 4.75%. Certificates of Deposit are a type of savings account with a fixed term and a fixed interest rate. They offer a safe way to grow your money, typically with higher rates than standard savings accounts. Understanding your potential earnings can help you make informed decisions about your savings goals.
How it Works
The calculation uses the following formula for compound interest, assuming interest is compounded annually:
Future Value = P * (1 + r)^t
Where:
P is the Principal amount (your initial deposit).
r is the annual interest rate (in this case, 4.75% or 0.0475).
t is the term of the CD in years.
The calculator will show you the total amount you'll have at the end of the term and the total interest earned.
Example Calculation
Let's say you deposit $10,000 into a CD with a 4.75% annual interest rate for a term of 5 years.
Principal (P) = $10,000
Annual Interest Rate (r) = 4.75% or 0.0475
Term (t) = 5 years
Using the formula: Future Value = 10000 * (1 + 0.0475)^5
Future Value = 10000 * (1.0475)^5
Future Value ≈ 10000 * 1.25968
Future Value ≈ $12,596.80
Total Interest Earned ≈ $12,596.80 – $10,000 = $2,596.80