Interest Rate Calculator CD

CD Compound Interest Formula:

\[ A = P \times (1 + \frac{R}{n})^{n \times T} \]

Principal (P):

Annual Interest Rate (R):

Compounding Frequency (n):

Time (T):

years

Maturity Amount (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the CD Compound Interest Formula?

The CD compound interest formula calculates the maturity amount for a Certificate of Deposit (CD) with compounding interest. It accounts for the principal amount, annual interest rate, compounding frequency, and time period to determine the final value of the investment.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + \frac{R}{n})^{n \times T} \]

Where:

$ A $ — Maturity amount ($)
$ P $ — Principal amount ($)
$ R $ — Annual interest rate (decimal)
$ n $ — Compounding frequency per year
$ T $ — Time in years

Explanation: The formula calculates how much an initial investment will grow over time with compound interest, where interest is added to the principal at regular intervals, earning more interest in subsequent periods.

3. Importance of CD Interest Calculation

Details: Accurate CD interest calculation is crucial for financial planning, comparing investment options, and understanding the true growth potential of your savings over time.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as a percentage, select compounding frequency, and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest, leading to exponential growth.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (e.g., daily vs. annually) results in higher returns because interest is calculated and added to the principal more often.

Q3: Are CD interest rates fixed or variable?
A: Most CDs have fixed interest rates for the term duration, though some special CDs may offer variable rates.

Q4: What happens if I withdraw my CD early?
A: Early withdrawal typically results in penalties, which may include loss of some or all accrued interest.

Q5: Are CD investments FDIC insured?
A: Yes, CDs offered by FDIC-insured banks are protected up to $250,000 per depositor, per institution.