Bank Rate CD Calculator
Calculate your certificate of deposit returns based on APY and compounding frequency.
Understanding CD Returns
A Certificate of Deposit (CD) is a 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, the issuing bank pays you a specific yield, often higher than standard savings accounts. This tool helps you determine exactly how much interest you will accrue based on current bank rates.
The Mathematics of APY and Compounding
The calculation for a CD uses the compound interest formula:
A = P(1 + r/n)^(nt)
- A = The final amount including interest
- P = The initial deposit (principal)
- r = The annual percentage yield (as a decimal)
- n = The number of times interest is compounded per year
- t = The number of years the money is invested
Practical Examples
Suppose you deposit $5,000 into a 24-month CD with an APY of 4.00% compounded monthly:
- Principal: $5,000
- APY: 0.04
- Months: 24 (2 years)
- Calculation: $5,000 * (1 + 0.04/12)^(12 * 2)
- Result: $5,415.71
- Total Interest: $415.71
What to Consider Before Opening a CD
When using this bank rate CD calculator, keep in mind that most CDs carry an "Early Withdrawal Penalty." If you need to access your funds before the term expires, the bank may charge a fee equal to several months of interest, which could eat into your principal. Always ensure the term length aligns with your liquidity needs.