CD interest calculator
By Jude Wallis
A certificate of deposit grows by its APY once a year, because APY already contains whatever compounding happens inside the year. $10,000 at 4.50 percent for 5 years becomes $12,461.82, which is $2,461.82 of interest.
Value at maturity
$12,461.82
$2,461.82 of interest at 4.50% APY.
- Future value
- $12,461.82
- Interest earned
- $2,461.82
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On this page
The formula
is the deposit, APY the annual percentage yield as a decimal, and the years. APY is used once a year because it is already an annual figure.
APY is the number that is already done
A bank may compound daily, monthly or quarterly, and the APY is what all of that adds up to over a year. Multiply by the APY once per year and the answer is right. Take the APY and compound it monthly as well and you have counted the same compounding twice, which is the single most common error on deposit maths.
When a rate is quoted as APR rather than APY, the conversion has to happen first. APR against APY does exactly that, and APY covers what the quoted number contains.
Interest earns interest
$10,000 at 4.50 percent earns 450 in year one. In year two the balance is larger, so the interest is larger, and by year five the total is $12,461.82. Simple interest at the same rate would have produced 2250 rather than $2,461.82.
That difference is small over five years and large over twenty, which is the whole argument for locking money away where the interest cannot be spent. The compound interest calculator runs the general case.
The term is a commitment as well as a rate
The rate is fixed for the term, which is the point of a CD: it is known in advance, whatever happens to rates elsewhere. That works in both directions, and it is why terms are chosen rather than defaulted to.
A ladder is the usual answer: several CDs maturing at different dates, so part of the money comes free each year and can be redeposited at whatever rates then exist. How CD ladders work sets that structure out.
What the projection contains
This is a fixed rate, fixed term deposit compounded at its stated APY and held to maturity, with interest left in. It is the cleanest arithmetic in personal finance because both inputs are contractual rather than estimated. Certificate of deposit covers the instrument itself. This is educational material, not financial advice.
Worked examples
\$10,000 at 4.50 percent for 5 years
A $10,000 deposit earns 4.50 percent APY for 5 years, with interest left to compound. What is it worth at maturity?
- Grow by 1.045 once for each year: .
- Interest is the growth: .
The CD matures at $12,461.82, of which $2,461.82 is interest on the original $10,000.
A shorter term at a higher rate
$5,000 at 5 percent APY for 3 years. What is the maturity value?
- Three annual steps: .
- Interest: , which is $788.13 to the cent.
The CD matures at $5,788.13 and earns $788.13 of interest on $5,000.
Compounding the APY monthly
APY is the annual result of whatever compounding the bank does. Dividing 4.50 percent by 12 and compounding it monthly on top adds interest that the quoted rate already contained, and overstates the $12,461.82 maturity value. Use APY once a year, or use APR with the bank's own frequency.
Common questions
What is the difference between APR and APY here?
APR is the nominal rate before compounding; APY is what a year of that compounding actually produces. This calculator takes APY.
Does the interest have to stay in the CD?
This projection assumes it does. Interest paid out instead grows the balance no further, so the total lands lower.
Is this financial advice?
No. It is educational material for the fixed rate deposit identity.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.