APY CD Calculator
A Certificate of Deposit (CD) is a type of savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you open a CD, you agree to keep your money in the account for the entire term. If you withdraw your money before the term ends, you may face penalties.
The Annual Percentage Yield (APY) is a standardized measure that reflects the total amount of interest you will earn on an account over a year, taking into account the effect of compounding interest. It's a more accurate representation of the return on your investment than the simple stated annual interest rate, especially when interest is compounded more frequently than once a year.
This calculator helps you determine the APY for a CD based on its stated annual rate and compounding frequency, as well as the total interest you'll earn and the final value of your CD at maturity.
How to Use the APY CD Calculator:
- Initial Deposit ($): Enter the principal amount you plan to invest in the CD.
- Stated Annual Rate (%): Input the nominal annual interest rate offered by the CD.
- Compounding Frequency: Select how often the interest is compounded per year (e.g., Annually, Quarterly, Monthly, Daily).
- CD Term (Years): Specify the duration of your CD in years.
- Click "Calculate APY" to see the results.
Understanding the Results:
- Annual Percentage Yield (APY): This is the effective annual rate of return, considering the effect of compounding. It allows for an apples-to-apples comparison between different CDs or savings accounts.
- Total Interest Earned: The total amount of interest your initial deposit will accrue over the entire CD term.
- Total Value at Maturity: The sum of your initial deposit and the total interest earned, representing the final amount you will receive when the CD matures.
Example:
Let's say you deposit $10,000 into a 3-year CD with a stated annual rate of 4.5% that compounds monthly.
- Initial Deposit: $10,000
- Stated Annual Rate: 4.5%
- Compounding Frequency: Monthly (12 times per year)
- CD Term: 3 Years
Using the calculator, you would find:
- APY: Approximately 4.594%
- Total Interest Earned: Approximately $1,450.68
- Total Value at Maturity: Approximately $11,450.68
This example demonstrates how compounding can slightly increase your effective return compared to the stated rate, and how much your investment can grow over the CD's term.
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function calculateAPYCD() {
var initialDeposit = parseFloat(document.getElementById('initialDeposit').value);
var statedRate = parseFloat(document.getElementById('statedRate').value);
var compoundingFrequency = parseInt(document.getElementById('compoundingFrequency').value);
var cdTerm = parseFloat(document.getElementById('cdTerm').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(initialDeposit) || initialDeposit <= 0) {
resultDiv.innerHTML = '
Please enter a valid Initial Deposit.
';
return;
}
if (isNaN(statedRate) || statedRate < 0) {
resultDiv.innerHTML = '
Please enter a valid Stated Annual Rate (%).
';
return;
}
if (isNaN(cdTerm) || cdTerm <= 0) {
resultDiv.innerHTML = '
Please enter a valid CD Term in years.
';
return;
}
var nominalRateDecimal = statedRate / 100;
// Calculate APY
var apy = Math.pow((1 + (nominalRateDecimal / compoundingFrequency)), compoundingFrequency) – 1;
var apyPercentage = apy * 100;
// Calculate Future Value (Total Value at Maturity)
var totalValueAtMaturity = initialDeposit * Math.pow((1 + (nominalRateDecimal / compoundingFrequency)), (compoundingFrequency * cdTerm));
// Calculate Total Interest Earned
var totalInterestEarned = totalValueAtMaturity – initialDeposit;
resultDiv.innerHTML =
'
Annual Percentage Yield (APY): ' + apyPercentage.toFixed(3) + '%
' +
'
Total Interest Earned: $' + totalInterestEarned.toFixed(2) + '
' +
'
Total Value at Maturity: $' + totalValueAtMaturity.toFixed(2) + '
';
}