Calculate your potential earnings from a Certificate of Deposit.
Understanding Certificate of Deposit (CD) Earnings
A Certificate of Deposit (CD) is a financial product offered by banks and credit unions that allows you to earn interest on your deposited money for a fixed period. In exchange for committing your funds for a specific term, the financial institution typically offers a higher interest rate than a standard savings account. CDs are generally considered low-risk investments, making them popular for individuals looking to preserve capital while earning a predictable return.
How the CD Calculator Works
This CD calculator helps you estimate the total value of your investment and the interest you will earn at the end of your CD's term. The calculation is based on the compound interest formula, which accounts for interest being added to the principal, and then the interest earned in future periods is calculated on the increased principal.
The formula used for calculating the future value of an investment with compound interest is:
FV = P (1 + r/n)^(nt)
Where:
FV is the Future Value of the investment/loan, including interest.
P is the Principal amount (the initial deposit).
r is the Annual interest rate (as a decimal).
n is the number of times that interest is compounded per year.
t is the number of years the money is invested or borrowed for.
In our calculator:
P is your Initial Deposit Amount.
r is your Annual Interest Rate divided by 100 (to convert percentage to decimal).
n is the Compounding Frequency per year.
t is your Term (Months) divided by 12 (to convert months to years).
Key Inputs Explained:
Initial Deposit Amount (Principal): The amount of money you initially deposit into the CD.
Annual Interest Rate (%): The yearly percentage rate of return offered by the CD.
Term (Months): The duration for which you agree to keep your money in the CD. Common terms range from 3 months to 5 years or more.
Compounding Frequency (per year): This indicates how often the interest earned is added back to the principal, allowing it to earn further interest. Common frequencies include:
Annually (n=1)
Semi-annually (n=2)
Quarterly (n=4)
Monthly (n=12)
More frequent compounding generally leads to slightly higher earnings over time.
Interpreting the Results:
The calculator will display two key figures:
Total Value at Maturity: This is the sum of your initial deposit and all the accumulated interest by the end of the term. (FV)
Total Interest Earned: This is the difference between the total value at maturity and your initial deposit. (FV - P)
When to Use a CD Calculator:
Comparing CD Offers: When you have multiple CD offers from different banks, use this calculator to compare which one will yield the best return based on their stated rates and terms.
Financial Planning: To understand how much interest you can expect from a CD for a specific savings goal or to allocate a portion of your savings.
Evaluating Different Terms: To see how increasing or decreasing the term length impacts your potential earnings, given the same interest rate.
Understanding Compounding: To visualize the benefit of more frequent compounding periods.
Disclaimer: This calculator provides an estimation based on the provided inputs and the compound interest formula. It does not account for potential fees, taxes on interest earnings, or changes in interest rates. Always consult with a financial advisor for personalized advice.
function calculateCDEarnings() {
var principal = parseFloat(document.getElementById("principalAmount").value);
var rate = parseFloat(document.getElementById("annualInterestRate").value);
var termMonths = parseFloat(document.getElementById("termMonths").value);
var compoundingFrequency = parseFloat(document.getElementById("compoundingFrequency").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Validate inputs
if (isNaN(principal) || principal <= 0) {
resultDiv.innerHTML = "Please enter a valid Initial Deposit Amount.";
return;
}
if (isNaN(rate) || rate < 0) {
resultDiv.innerHTML = "Please enter a valid Annual Interest Rate.";
return;
}
if (isNaN(termMonths) || termMonths <= 0) {
resultDiv.innerHTML = "Please enter a valid Term in Months.";
return;
}
if (isNaN(compoundingFrequency) || compoundingFrequency <= 0) {
resultDiv.innerHTML = "Please enter a valid Compounding Frequency (e.g., 12 for monthly).";
return;
}
// Convert annual rate to decimal and term to years
var rateDecimal = rate / 100;
var termYears = termMonths / 12;
// Calculate future value using compound interest formula
// FV = P (1 + r/n)^(nt)
var futureValue = principal * Math.pow(1 + (rateDecimal / compoundingFrequency), compoundingFrequency * termYears);
// Calculate total interest earned
var totalInterest = futureValue – principal;
// Display results
resultDiv.innerHTML =
"$" + futureValue.toFixed(2) +
"Total Value at Maturity" +
"$" + totalInterest.toFixed(2) +
"Total Interest Earned";
}