CD Interest Calculator

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Reviewed by: Sarah Lee, Certified Financial Planner (CFP)
Sarah Lee is a CFP specializing in retirement and savings strategies, ensuring the calculations accurately reflect the compounding returns of Certificates of Deposit.

Use the authoritative **CD Interest Calculator** to project the Future Value (FV) of your Certificate of Deposit. Enter any three variables—Principal, Annual Rate, Term in Months, or Target Future Value—to solve for the remaining unknown value. This calculation assumes **monthly compounding**.

F: Target Future Value ($\mathbf{FV}$, $)

P: Principal / Initial Deposit ($\mathbf{P}$, $)

V: Annual Interest Rate ($\mathbf{r}$, %)

Q: Term in Months ($\mathbf{n}$, Months)

CD Interest Formula

Calculation assumes **Monthly Compounding** ($\mathbf{m}=12$).

$$\mathbf{FV} = \mathbf{P} \times \left(1 + \frac{\mathbf{r}}{\mathbf{m}}\right)^{\mathbf{n}}$$

Where $\mathbf{r}$ is decimal rate, $\mathbf{m}=12$, and $\mathbf{n}$ is Term in Months.

The four solution formulas:

$\mathbf{FV}$ (F) $= P \times (1 + i)^n$

$\mathbf{P}$ (P) $= FV / (1 + i)^n$

$\mathbf{r}$ (Rate, V) $= 12 \times \left( (FV/P)^{\frac{1}{n}} – 1\right) \times 100$

$\mathbf{n}$ (Months, Q) $= \frac{\ln(FV / P)}{\ln(1 + i)}$

Formula Source: Investopedia (CD/Compound Interest)

Formula Variables

F ($\mathbf{FV}$): Future Value. The total amount, including accrued interest, upon maturity.
P ($\mathbf{P}$): Principal. The initial lump-sum amount deposited into the CD.
V ($\mathbf{r}$): Annual Interest Rate. The fixed annual percentage rate (APY) offered by the bank (%).
Q ($\mathbf{n}$): Term in Months. The fixed length of time the funds are locked up (e.g., 6, 12, 60 months).

Related Calculators

What is a CD Interest Calculation?

A Certificate of Deposit (CD) is a type of savings account that holds a fixed amount of money for a fixed period of time (term) and, in exchange, usually offers a higher interest rate than standard savings accounts. CD interest calculations determine the total return on the investment by compounding the interest over the term.

The calculation is based on the compound interest formula, where the interest earned is periodically added back to the principal, allowing future interest to be earned on a larger balance. The primary factors driving the final Future Value ($\mathbf{FV}$) are the initial Principal ($\mathbf{P}$), the Annual Rate ($\mathbf{r}$), and the Term ($\mathbf{n}$). Unlike typical savings, funds in a CD are penalized if withdrawn before the maturity date.

How to Calculate Required Rate (Example)

Let’s find the Annual Rate ($\mathbf{r}$, V) required to turn a Principal ($\mathbf{P}$) of \$10,000 into a Future Value ($\mathbf{FV}$) of \$10,750 over a 12-month term ($\mathbf{n}$, Q).

Step 1: Calculate Monthly Interest Rate ($\mathbf{i}$)
We use the inverse formula: $\mathbf{i} = (FV/P)^{1/n} – 1$. $\mathbf{i} = (10750 / 10000)^{1/12} – 1 \approx 0.006045$
Step 2: Convert Monthly Rate to Annual Rate ($\mathbf{r}$)
Since compounding is monthly ($\mathbf{m}=12$), $\mathbf{r} = 12 \times \mathbf{i}$.
Step 3: Substitute and Solve for $\mathbf{r}$
$\mathbf{r} = 12 \times 0.006045 \times 100 \approx 7.254\%$.
Step 4: Determine the Required Annual Rate
The calculation yields a required Annual Rate ($\mathbf{r}$, V) of **7.254\%**.

Frequently Asked Questions (FAQ)

What is the typical compounding frequency for CDs?

CDs typically compound interest daily, monthly, or quarterly. For consumer comparisons, many calculators (including this one) assume **monthly compounding** ($\mathbf{m}=12$), as it is the most common consumer banking frequency after daily.

What happens if I withdraw money early?

Withdrawing funds before the term’s maturity date will typically incur an early withdrawal penalty. This penalty is often calculated as a forfeiture of a certain number of months’ worth of interest, depending on the bank and the length of the term.

Are CDs risky?

CDs are generally considered one of the safest investments because they are typically FDIC-insured (up to $250,000 per depositor, per institution). The main risk is liquidity risk, as your money is locked up for the duration of the term.

How can I maximize my CD interest?

To maximize interest, look for the highest Annual Rate ($\mathbf{r}$), choose the longest term ($\mathbf{n}$) you are comfortable with (as longer terms often offer higher rates), and ideally, find a CD that compounds interest more frequently (though this calculator assumes monthly).

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