CD Investment Growth Calculator
Calculate exactly how much your Certificate of Deposit will grow over time.
Understanding Certificate of Deposit (CD) Growth
A Certificate of Deposit (CD) is a low-risk savings tool that typically offers a higher APY than a standard savings account in exchange for leaving your money untouched for a fixed period. Using a CD calculator helps you visualize the impact of compound interest and time on your initial investment.
How APY Affects Your Earnings
The Annual Percentage Yield (APY) represents the real rate of return on your deposit, taking into account the effect of compounding interest. Unlike a simple interest rate, APY assumes the interest earned remains in the account to earn even more interest. The higher the compounding frequency (e.g., daily vs. annually), the faster your wealth accumulates.
The Power of Compounding
Compounding is the process where the interest you earn earns interest of its own. Our calculator uses the standard compound interest formula:
A = P(1 + r/n)^(nt)
- A = Final Balance
- P = Initial Deposit
- r = Annual Interest Rate (decimal)
- n = Number of compounding periods per year
- t = Time in years
Example Calculation
If you deposit $10,000 into a 24-month CD with a 5.00% APY compounded monthly:
- Initial Principal: $10,000
- Monthly Interest: 0.4167% (approx)
- Total after 2 years: $11,049.41
- Total Interest Earned: $1,049.41
CD Strategy: Building a Ladder
A "CD Ladder" is a common investment strategy where you divide your total investment into multiple CDs with different maturity dates. For example, rather than putting $50,000 in a 5-year CD, you might put $10,000 each into 1-year, 2-year, 3-year, 4-year, and 5-year CDs. This provides better liquidity and allows you to reinvest maturing funds at potentially higher future rates.