CD Calculator

A CD calculator is a handy tool that can help you quantify the annual percentage yield and interest income offered by a certificate of deposit. The best calculators are very straightforward, offering some basic educational content and easy-to-interpret results. To use a CD calculator, all you need is the amount to be deposited, the number of months until maturity, the published interest rate and the compounding frequency of the CD.

Thomas Brock, CFA, CPA, expert contributor to Annuity.org
  • Written By
    Thomas J. Brock, CFA®, CPA

    Thomas J. Brock, CFA®, CPA

    Expert Contributor

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

    Read More
  • Edited By
    Lamia Chowdhury
    Lamia Chowdhury

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial editor at Annuity.org. Lamia carries an extensive skillset in the content marketing field, and her work as a copywriter spans industries as diverse as finance, health care, travel and restaurants.

    Read More
  • Updated: March 23, 2023
  • 6 min read time
  • This page features 5 Cited Research Articles
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APA Brock, T. J. (2023, March 23). CD Calculator. Annuity.org. Retrieved April 1, 2023, from https://www.annuity.org/personal-finance/banking/certificate-of-deposit/cd-calculator/

MLA Brock, Thomas J. "CD Calculator." Annuity.org, 23 Mar 2023, https://www.annuity.org/personal-finance/banking/certificate-of-deposit/cd-calculator/.

Chicago Brock, Thomas J. "CD Calculator." Annuity.org. Last modified March 23, 2023. https://www.annuity.org/personal-finance/banking/certificate-of-deposit/cd-calculator/.

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What Is a CD Calculator and Why Do I Need One?

A CD calculator is a tool that allows you to quickly quantify the effective annual interest rate and interest income offered by a CD. This is important because some CD issuers use vague information to market their products and fail to convey the actual economic value offered.

So, this type of calculator allows you to cut through that ambiguity and get a clear understanding of the financial benefit of a CD. Ultimately, this enables you to perform comparative evaluations of potential investments and optimize your decisions.

A certificate of deposit (CD) is a high-quality, low-risk savings vehicle offered by commercial banks and credit unions to their customers. CD structures vary, but most provide a fixed rate of interest in exchange for a commitment to lock up the invested funds for a set term. Early withdrawal typically results in a loss-of-interest penalty.

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How To Use Our CD Calculator

You will need to provide some information in order to use the calculator.

Initial Deposit
This is the amount of money you intend to invest in the CD.
Months
This is the number of months until maturity of the CD (3 months, 6 months, 12 months, 24 months, etc.).
Interest Rate
This is the published, annualized interest rate for the CD. This is not the annual percentage yield. Instead, it is the simple interest rate marketed by the issuing institution before consideration for the compounding of interest.
Compounding
Compounding frequency refers to the number of times per year that interest income is computed and added to your principal balance, which facilitates the accumulation of “interest on interest.” The most common compounding frequencies are daily, monthly, quarterly, semiannually and annually. The more frequent the compounding, the faster your CD investment will grow.

Once you have the aforementioned information on hand, take the following steps to determine how much you will earn from the CD.

3 Steps To Use the Calculator
  1. Input each item into the appropriate box.
  2. Select the “Calculate” button, which will instantaneously generate the annual percentage yield and interest income offered by the CD.
  3. For additional insight, click on the "View Report" button for a detailed schedule of the CD balance and interest earned over time.

How This Calculator Determines CD Interest

The calculator determines the end value of a CD through a mathematical formula.

The starting point is the computation of a CD’s annual percentage yield (APY). The APY, which is also referred to as the effective annual rate, reflects the effect of compound interest. The computation is as follows:

APY = (1 + Published CD Rate ÷ Compounding Periods) ^ Compounding Periods – 1

So, for a hypothetical $10,000 investment in a two-year CD offering a nominal rate of 5.00% compounded daily, the APY is as follows:

APY = (1 + 0.05000 ÷ 365) ^ 365 – 1 = 0.05127 or 5.127%

Then, you can calculate the ending value of the CD as follows:

Ending CD Value = Invested Amount × (1 + APY) ^ (Term ÷ 12)

Ending CD Value = $10,000.00 × (1 + 0.05127) ^ (24 ÷ 12) = $11,051.63

The difference between the initial investment ($10,000.00) and the ending balance ($11,051.63) is the interest income earned over the life of the CD. If you run the inputs through the CD calculator, you’ll get the same result.

Average CD Rates

Once a month, the Federal Deposit Insurance Corporation (FDIC) publishes national average rates for CDs. The term-specific data points reflect deposit-weighted averages of the rates paid by all insured banks and credit unions for which the FDIC has data.

This resource is a good starting point for determining whether a CD rate is competitive, but matching the national average is not a great investing achievement. Rather, you should strive to find the highest available rates in the market, which tend to be about five times higher than the national average, regardless of the interest rate environment.

CDs reflect various terms, usually between one month and five years. Generally, the longer the term, the higher the interest rate, holding all else constant.

Minimum deposit requirements also vary. At the low end, you may be required to invest a few hundred dollars; at the high end, the requirement could be hundreds of thousands of dollars. Generally, the more money you deposit, the higher the interest rate, again, holding all else constant.

Fast Fact
Generally, the highest CD rates you will ever see are comparable to the rate of inflation. Higher yields are rare.

Other Frequently Asked Questions About Certificates of Deposit

Can you lose the money you invest in a CD?
CDs require you to lock up your money until the specified maturity date. Early withdrawals are subject to loss-of-interest penalties. In some situations, loss of principal is possible.

Additionally, CDs are exposed to inflation risk, which is the possibility that widespread price increases will exceed the fixed-rate income offered by these instruments. Ultimately, this erodes purchasing power and reduces the real value of your money.
What determines the interest you earn on a CD?
CD rates are largely influenced by the Federal Reserve's monetary policy actions and the resulting position of the federal funds rate, which is the overnight lending rate for commercial banks and the foundation for all longer-term lending arrangements. When the Fed increases or decreases the federal funds rate, banks and credit unions usually respond by moving their CD rates in the same direction. That said, there is always the possibility for deviation from the federal funds rate, which occurs any time a financial institution looks to adjust its competitive positioning in the deposit-seeking market.

Remember, the longer the CD term, the higher the interest rate you can usually obtain, holding all else constant. In many instances, you can also obtain a higher interest rate by increasing the amount of your deposit.
Where can you purchase CDs?
CDs are offered by most commercial banks and credit unions. The process of investing in a CD is just like opening a traditional checking or savings account. You need to apply online or in-person with the issuing financial institution, which requires disclosure of some personal information and the deposit of the funds you wish to invest, usually either via ACH transfer, check or cash.
Are CDs FDIC insured?
CDs are among the safest investment vehicles in the market. If structured properly, a CD is fully ensured up to $250,000 for an individual account and $500,000 for a joint account. The FDIC insures CDs issued by banks, and the National Credit Union Administration (NCUA) insures CDs issued by credit unions.
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Last Modified: March 23, 2023
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Written By
Thomas Brock, CFA, CPA, expert contributor to Annuity.org
Thomas J. Brock, CFA®, CPA Expert Contributor
  • Chartered Financial Analyst (CFA®)
  • AVP, Treasury & Investments at a super-regional insurance carrier
  • Over 20 years of experience in the financial industry
View Bio
Edited By
Lamia Chowdhury
Lamia Chowdhury Financial Editor
View Bio

5 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Federal Deposit Insurance Corporation. (2023, February 21). National Rates and Rate Caps - Monthly Update. Retrieved from https://www.fdic.gov/resources/bankers/national-rates/
  2. Consumer Financial Protection Bureau. (n.d.). Annual Percentage Yield Calculation. Retrieved from https://www.consumerfinance.gov/rules-policy/regulations/1030/a/
  3. Federal Deposit Insurance Corporation. (n.d.). About the FDIC. Retrieved from https://www.fdic.gov/about/
  4. Federal Reserve Bank of St. Louis. (2023, February 1). Effective Federal Funds Rate. Retrieved from https://fred.stlouisfed.org/series/FEDFUNDS
  5. National Credit Union Administration (NCUA). (n.d.). About the NCUA. Retrieved from https://ncua.gov/