An APY Calculator CD helps investors calculate the Annual Percentage Yield for Certificate of Deposit investments. It considers compound interest frequency to show actual earnings, enabling comparison between different CD offers. Users can input principal amount, interest rate, term length, and compounding frequency to determine total returns and effective yield, helping make informed investment decisions and maximize savings growth potential.
APY Formula
APY = (1 + r/n)n - 1
Where: r = annual interest rate (decimal), n = number of compounding periods per year
How to Use
Enter your CD investment details: deposit amount, annual interest rate, term length, and compounding frequency (typically 365 for daily). Click Calculate to see APY and total maturity amount. Use Clear to reset values. Compare results with different rates/terms to find optimal investment options. The calculator automatically computes compound interest earnings and effective annual yield.
Derivation Process
The APY formula derives from compound interest calculations. For CD investments: A = P(1 + r/n)nt. APY normalizes returns to annual yield regardless of compounding frequency. By isolating the yearly growth factor (1 + r/n)n and subtracting 1, we get the effective annual yield. This standardization allows fair comparison between CDs with different compounding schedules while accounting for interest-on-interest earnings.
Example APY Table
Rate
Compounding
APY
3%
Monthly
3.04%
3%
Daily
3.05%
4%
Quarterly
4.06%
FAQs
What's the difference between APY and APR?
APY includes compound interest effects while APR doesn't. For CDs, APY shows actual annual earnings including reinvested interest, making it higher than APR when compounding occurs more than annually.
Does compounding frequency affect APY significantly?
Yes, more frequent compounding increases APY. Daily compounding typically yields 0.05-0.15% higher APY than annual compounding at same rates.
Are CD earnings taxable?
Yes, interest earned on CDs is taxable income. This calculator shows pre-tax returns.
Can I withdraw CD funds early?
Most CDs impose penalties for early withdrawal, reducing actual returns. This calculator assumes full term completion.
How do CD rates compare to savings accounts?
CDs typically offer higher rates than regular savings accounts but require locked-in funds. Use this calculator to compare options.
What's better: higher rate or more compounding?
Generally, higher rates have bigger impact. A 0.1% rate increase usually outweighs compounding frequency differences.
Do all CDs use daily compounding?
No, compounding varies by institution. Common frequencies: daily, monthly, quarterly. Check your CD terms.
How accurate is this calculator?
It provides mathematical projections assuming constant rates. Actual returns may vary with bank rounding methods.
Does APY include fees?
No, APY calculations don't account for potential account fees. Net returns might be lower if fees apply.
Can I use this for brokered CDs?
Yes, works for any fixed-rate CD. Doesn't account for callable CDs or secondary market price fluctuations.
