Certificate of Deposit (CD) Calculator
Calculate the future value and interest earnings of your investment
Understanding Your Certificate Investment
A Certificate of Deposit (CD) is a specialized savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years. In exchange for leaving that money untouched, the issuing bank pays you a higher interest rate than a standard savings account.
How the Certificate Calculator Works
Our calculator uses the compound interest formula to determine the exact value of your certificate at its maturity date. To get an accurate reading, you need four key pieces of information:
- Initial Deposit: The total amount of principal you intend to place into the certificate.
- Annual Percentage Yield (APY): The effective annual rate of return, which accounts for the effect of compounding interest.
- Term Length: The duration the funds must stay in the account to avoid early withdrawal penalties.
- Compounding Frequency: How often the interest is calculated and added back to your principal balance.
The Math Behind the Certificate
The calculation follows the standard formula: A = P(1 + r/n)^(nt)
Where:
- A = The amount of money accumulated after n years, including interest.
- P = The principal investment amount.
- r = The annual interest rate (decimal).
- n = The number of times that interest is compounded per unit t.
- t = The time the money is invested for in years.
Example Calculation
If you deposit $10,000 into a 24-month (2-year) certificate with a 5.00% APY compounded monthly, the calculation would look like this:
Your ending balance would be $11,049.41, meaning you earned $1,049.41 in interest just by letting the funds sit in the certificate.
Why Use a CD?
Certificates are ideal for low-risk investors who have a specific goal in mind—like a house down payment or a wedding—and know exactly when they will need the cash. Because the rate is locked in, you are protected from falling interest rates during your term.