Bankrate Cd Calculator

CD Future Value Calculator

Annually Semi-Annually Quarterly Monthly Daily

Future Value of CD:

Total Interest Earned:

Understanding Certificate of Deposit (CD) Investments

A Certificate of Deposit (CD) is a type of savings account that holds a fixed amount of money for a fixed period of time, and in return, the issuing bank pays interest. CDs are generally considered low-risk investments because they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per institution, for each account ownership category.

How CDs Work

When you open a CD, you agree to deposit a specific amount of money for a predetermined term, which can range from a few months to several years. In exchange, the bank offers a fixed interest rate for the entire term. Unlike a regular savings account, you typically cannot withdraw money from a CD before its maturity date without incurring a penalty. This commitment allows banks to offer higher interest rates compared to standard savings accounts.

Key Components of a CD

• Initial Deposit (Principal): This is the amount of money you initially invest in the CD. The larger your principal, the more interest you can earn.
• Annual Interest Rate: This is the percentage rate at which your investment grows each year. CD rates are typically fixed for the entire term.
• CD Term (Years): This is the length of time your money is locked into the CD. Common terms include 6 months, 1 year, 3 years, or 5 years. Longer terms often come with higher interest rates.
• Compounding Frequency: This refers to how often the interest earned is added back to your principal, which then also starts earning interest. The more frequently interest is compounded (e.g., daily vs. annually), the faster your money grows due to the power of compound interest. Common frequencies include annually, semi-annually, quarterly, monthly, or daily.

Using the CD Future Value Calculator

Our CD Future Value Calculator helps you estimate how much your Certificate of Deposit will be worth at the end of its term, including the total interest earned. Here's how to use it:

1. Initial Deposit: Enter the amount of money you plan to invest in the CD. For example, if you're starting with $10,000, enter "10000".
2. Annual Interest Rate (%): Input the annual interest rate offered by the bank. If the rate is 5%, enter "5.0".
3. CD Term (Years): Specify the duration of the CD in years. For a 3-year CD, enter "3".
4. Compounding Frequency: Select how often the interest is compounded. Options include Annually, Semi-Annually, Quarterly, Monthly, or Daily. Monthly compounding is a common choice.

After entering these details, click "Calculate CD Value" to see the projected future value of your CD and the total interest you will have earned.

Example Calculation

Let's say you deposit $10,000 into a CD with an annual interest rate of 5.0% for a term of 3 years, compounded monthly.

• Initial Deposit: $10,000
• Annual Interest Rate: 5.0%
• CD Term: 3 Years
• Compounding Frequency: Monthly (12 times per year)

Using the formula FV = P * (1 + r/n)^(nt):

• P = $10,000
• r = 0.05 (5% as a decimal)
• n = 12 (monthly compounding)
• t = 3 (years)

FV = 10000 * (1 + 0.05/12)^(12*3)

FV = 10000 * (1 + 0.0041666667)^(36)

FV = 10000 * (1.0041666667)^36

FV = 10000 * 1.161472

FV = $11,614.72

The total interest earned would be $11,614.72 – $10,000 = $1,614.72.

This calculator provides a quick and easy way to visualize the growth of your CD investment, helping you make informed financial decisions.