How To Use A CD Calculator

When reviewing Certificate of Deposit (CD) offers from banks, you can use a CD calculator to evaluate these offers to see what is the best one for you. A CD calculator uses data about the CD to illustrate to you which offer is the right one for you.

In this article we will look at the data and results from the CD Calculator located at Finance News Today. To begin let's look at the data needed.

The certificate of deposit calculator uses four pieces of data from your CD offer; The amount of the initial deposit, the annual interest rate, the term of the CD, and how often interest is compounded.

The initial deposit is the dollar amount you will be investing into the certificate of deposit. Be advised that many CD's have a set minimum you will be required to invest. Some dollar amounts are as low as $ 500 while others may be $ 50,000 or higher.

The amount of interest you earn on your CD is a direct result of what is known as the annual percentage rate (APR). This is the interest paid to you over the period of one year. Typically, the APR is lower on shorter term CD's and higher on longer term CD's.

The CD maturity date is the number of months until the CD matures. Some CD's have short terms of as little as 6 months to as long as 60 months or longer. Be sure to review the information on maturity dates in the CD literature.

Interest on CD's are compounded at set intervals. These intervals are known as the compounding intervals. This is the process where earned interest is added to the balance so that interest is compounded itself. The CD calculator at Finance News Today allows you to select daily, monthly, quarterly, semi-annual, or annual intervals.

Closing Comments

The CD calculator will then take this data and determine what the future value of the money is, how much interest you've earned, and what your annual percentage yield (APY) will be.

Source by Hubert Miles

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