Annual percentage yield calculator cd
The calculator above handles the two numbers a CD question turns on: your deposit and the yield. Below are the exact steps for one year, for a longer term, and the mistake to avoid.
12 × 12 = 144
Adding 12 to itself 12 times gives the same answer.
What this page calculates
Definitional arithmetic on the numbers you type in, and nothing else. It turns a nominal rate and a compounding frequency into an APY, and applies an APY you enter to a deposit you enter. It looks up no bank’s rate and quotes no product. Tax, account fees, early-withdrawal penalties and any change to the rate during the term are all outside the calculation, so read every figure below as a maths result rather than as an offer or a promise.
From a nominal rate to APY
APY = (1 + rate ÷ n) multiplied by itself n times, then minus 1, where n is the number of compounding periods in a year. A nominal 4.40% compounded monthly is (1 + 0.044 ÷ 12) to the twelfth power, minus 1, which comes to roughly 4.49%. Compounded once a year, the rate and the APY are the same number.
One year is one multiplication
APY already has the compounding baked into it, so a single year of interest is just deposit × APY. Turn the percentage into a decimal first by moving the point two places left: 4.5% becomes 0.045.
A 10,000 deposit at 4.50% APY earns 10,000 × 0.045 = 450, finishing the year at 10,450.
Longer terms: multiply once per year
Do not multiply one year’s interest by the number of years. That ignores the interest your interest earns. Multiply the running balance by 1 plus the decimal instead, once for each year.
- Year 1: 10,000 × 1.045 = 10,450
- Year 2: 10,450 × 1.045 = 10,920.25
- Year 3: 10,920.25 × 1.045 = 11,411.66
Three years pay 1,411.66, not the 1,350 that three lots of 450 suggests. The gap grows with the term and with the rate.
APY is not the quoted rate
The interest rate describes what the money earns before compounding. APY describes what a full year actually returns once compounding is counted, which is why it is the honest number to compare between banks. A rate compounded monthly always produces an APY a little above the rate itself.
When the figure looks wrong
- A term under a year. Six months at 4.5% APY pays roughly half of 4.5%, not the whole thing.
- Interest paid out. APY assumes the interest stays put. If it is swept to another account each month, nothing compounds and you get the flat figure.
- Early withdrawal. Cashing in before the term ends normally costs a penalty in interest, set by the bank and written in the terms.
- Tax. Every number here is before tax.
If the decimal conversion is the awkward part, see how to find a percentage on a calculator. The same year-by-year multiplication drives a pay raise calculator. Everything else is on the calculators page.