Certificate of deposit calculator

What is a certificate of deposit calculator?

A certificate of deposit (CD) calculator is a free online tool that estimates how much a fixed-term deposit will be worth when it matures. You enter the amount you deposit, the annual interest rate the bank offers, how long the money is locked in, and how often the interest compounds. The calculator returns the maturity value (the total balance at the end of the term), the interest you earn, and the annual percentage yield (APY).

A CD is a time deposit: you agree to leave a lump sum with a bank or credit union for a set period in exchange for a fixed interest rate that is usually higher than a regular savings account. In return you generally cannot withdraw the money early without paying a penalty.

How does a CD calculator work?

The calculator applies the compound interest formula to your deposit. Because the rate is fixed and no further contributions are made, the growth depends only on three things: the principal, the periodic rate, and the number of compounding periods.

• Deposit amount — the principal you place in the CD.
• Annual interest rate — the nominal yearly rate quoted by the bank.
• Term length — how long the money stays deposited, expressed in years or months.
• Compounding frequency — how often accrued interest is added back to the balance (daily, monthly, quarterly, semiannually, or annually).

More frequent compounding produces slightly more interest at the same nominal rate, which is why banks often advertise the APY rather than the plain rate.

Compounding frequency and APY

The nominal interest rate alone does not tell you how much a CD actually earns, because the answer also depends on how often interest is added to the balance. The annual percentage yield (APY) folds the compounding frequency into a single figure, letting you compare offers on equal footing. A 5% rate compounded monthly, for example, yields slightly more than 5% over a year. See our compound interest calculator for the general case, and the APY calculator for effective-yield comparisons.

Formula

The maturity value is calculated with the compound interest formula:

$A = P \left(1 + \frac{r}{n}\right)^{nt}$

Where:

• $A$ is the maturity value (balance at the end of the term).
• $P$ is the deposit amount (principal).
• $r$ is the annual interest rate expressed as a decimal.
• $n$ is the number of compounding periods per year.
• $t$ is the term length in years.

The interest earned is the maturity value minus the principal, and the annual percentage yield is:

$\text{APY} = \left(1 + \frac{r}{n}\right)^{n} - 1$

Worked example

Suppose you deposit 10000 into a CD paying a 5% annual rate, compounded monthly, for 2 years.

• Principal $P$ = 10000
• Rate $r$ = 0.05
• Compounding $n$ = 12 (monthly)
• Term $t$ = 2

Maturity value:

$A = 10000 \left(1 + \frac{0.05}{12}\right)^{12 \times 2} \approx 11049.41$

The interest earned is $11049.41 - 10000 = 1049.41$, and the annual percentage yield is:

$\text{APY} = \left(1 + \frac{0.05}{12}\right)^{12} - 1 \approx 0.05116 = 5.116\%$

Notes

• CDs typically carry an early-withdrawal penalty, so only deposit money you can leave untouched for the full term.
• The rate on a CD is fixed for the whole term, which protects you if market rates fall but limits gains if they rise.
• The interest shown here is before tax; interest earned on a CD is usually taxable in the year it is credited.
• Entering the term in months lets you model shorter CDs (for example, a 6-month or 18-month term) without converting to years yourself.

FAQs

What is the difference between the interest rate and the APY?

The interest rate is the nominal yearly rate the bank quotes. The APY also accounts for how often that interest compounds, so it reflects the true amount you earn over a year. When compounding happens more than once a year, the APY is always slightly higher than the nominal rate.

Does more frequent compounding earn more?

Yes, but the effect is modest. At the same nominal rate, daily compounding earns a little more than monthly, which earns a little more than annual. The difference grows with larger balances and longer terms, but the compounding frequency matters far less than the rate itself.

Can I add money to a CD after opening it?

Most standard CDs do not allow additional deposits after opening; you contribute a single lump sum at the start. This calculator therefore assumes no further contributions. If you plan to add money regularly, a savings-plan model is a better fit.