CD Calculator

Contents

How to Use the CD Calculator

1. Enter Initial Investment:

• In the field labeled “Initial Investment ($),” input the amount of money you plan to deposit into the CD. • Example: If you want to invest$20,000, you would enter 20000 in this field.
2. Enter the Term:

• In the “Term (months)” field, input the length of time you plan to keep the money in the CD, expressed in months.
• Example: For a 5-year term, you would enter 60 months.
3. Enter the Interest Rate:

• In the “Interest Rate (%)” field, input the annual interest rate offered by the CD. This rate is typically provided by the bank.
• Example: If the CD offers a 5.5% annual interest rate, you would enter 5.5.
4. Select the Compounding Frequency:

• Use the dropdown menu labeled “Compounding” to select how often the interest is compounded. Options include daily, monthly, quarterly, annually, etc.
• Example: If interest is compounded monthly, select “Monthly” from the dropdown menu.
5. Calculate:

• After entering all the required information, click the “Calculate” button to generate the results. The calculator will compute the future value of the CD and the total interest earned over the term.
6. View Results:

• The results will be displayed below the calculator, showing the following:
• Future Value: The total value of the investment at the end of the term.
• Interest Earned: The total amount of interest earned during the term.
• Yearly Breakdown: A table showing the growth of your investment year by year, including the final value at the end of the term.

Formula Used

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

Where:

• $A$

is the future value of the investment/loan, including interest.

• $P$

is the principal investment amount (the initial deposit or loan amount).

• $r$

is the annual interest rate (decimal).

• $n$

is the number of times that interest is compounded per unit

$t$

(the compounding frequency).

• $t$

is the time the money is invested or borrowed for, in years.

Example Calculation

Scenario:
You invest $20,000 in a 5-year CD with an annual interest rate of 5.5%, and the interest is compounded monthly. • Initial Investment:$20,000
• Term: 60 months (5 years)
• Interest Rate: 5.5%
• Compounding: Monthly

Steps:

1. Enter 20000 in the “Initial Investment ($)” field. 2. Enter 60 in the “Term (months)” field. 3. Enter 5.5 in the “Interest Rate (%)” field. 4. Select “Monthly” from the “Compounding” dropdown menu. 5. Click “Calculate.” Results: • Future Value:$26,314.08
• Interest Earned: \$6,314.08

The table will also display the investment growth year by year, with the final row showing the exact value at the end of the 5-year term.