A Certificate of Deposit (CD) is a financial product offered by banks and credit unions. It's a savings account that holds a fixed amount of money for a fixed period of time, in exchange for a fixed interest rate. CDs offer a predictable way to grow your savings, especially in environments where interest rates are favorable. However, they typically come with penalties if you withdraw your money before the term ends.
How the Payout is Calculated
The CD Payout Calculator helps you estimate the total amount you will receive at the end of your CD's term, including both your initial investment (principal) and the accumulated interest. The core of this calculation is the compound interest formula. Compound interest means that your interest earnings also start earning interest, leading to faster growth over time.
The formula used is the compound interest formula:
A = P (1 + r/n)^(nt)
A = 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
t = the number of years the money is invested or borrowed for
In our calculator:
Principal Amount (P): This is the initial amount you deposit into the CD.
Annual Interest Rate: This is the yearly rate of return offered on the CD. It's converted to a decimal (e.g., 4.5% becomes 0.045) for calculation.
Term (Months): The duration of the CD. This is converted into years (t = Term in Months / 12).
Compounding Frequency (n): This indicates how often the interest is calculated and added to the principal. Common options include Annually (1), Semi-Annually (2), Quarterly (4), Monthly (12), and Daily (365).
The calculator first determines the total value (A) at the end of the term. The total interest earned is then calculated by subtracting the original principal (P) from the total value (A):
Total Interest = A - P
When to Use This Calculator
Planning Your Savings Goals: See how much a CD could earn you over a specific period.
Comparing CD Offers: Evaluate different CDs with varying rates, terms, and compounding frequencies.
Understanding Investment Growth: Visualize the power of compound interest on your fixed-term deposits.
Remember to consider any potential early withdrawal penalties if you might need access to your funds before the CD matures, as these are not factored into this basic payout calculation.
function calculateCDPayout() {
var principal = parseFloat(document.getElementById("principal").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var termMonths = parseInt(document.getElementById("termMonths").value);
var compoundingFrequency = parseInt(document.getElementById("compoundingFrequency").value);
var resultDiv = document.getElementById("result");
var resultValueDiv = document.getElementById("result-value");
var totalInterestP = document.getElementById("total-interest");
// Clear previous results
resultValueDiv.textContent = "–";
totalInterestP.textContent = "";
// Input validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid principal amount (greater than 0).");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate (0 or greater).");
return;
}
if (isNaN(termMonths) || termMonths <= 0) {
alert("Please enter a valid term in months (greater than 0).");
return;
}
if (isNaN(compoundingFrequency) || compoundingFrequency <= 0) {
alert("Please select a valid compounding frequency.");
return;
}
var ratePerPeriod = annualInterestRate / 100 / compoundingFrequency;
var numberOfPeriods = termMonths;
var futureValue = principal * Math.pow((1 + ratePerPeriod), numberOfPeriods);
// Round to 2 decimal places for currency
var roundedFutureValue = futureValue.toFixed(2);
var roundedPrincipal = principal.toFixed(2);
var totalInterestEarned = (futureValue – principal).toFixed(2);
resultValueDiv.textContent = "$" + parseFloat(roundedFutureValue).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
totalInterestP.textContent = "Total Interest Earned: $" + parseFloat(totalInterestEarned).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}