A certificate of deposit is a method of saving money. You purchase a CD at a certain rate for a designated amount of time. You are guaranteed this percentage rate over the course of the certificate. If the market rises or drops, you are still locked in to the original percent. While the rates are typically more modest than an IRA or other more aggressive savings vehicles, they are safe and fairly liquid. If you need help calculating how much money you will make on your CD, read further. This article will explain calculate your certificate of deposit earnings.
Instructions
1. Transform your interest rate into a decimal point. Whatever your percentage, move the decimal point 2 places to the left and lose the % sign. For example, a 5% certificate of deposit would be expressed by a 0.05 decimal.
2. Divide the decimal point percentage amount by 365. This will give you the interest rate you earn each and every day. You use 365 since there are 365 days in a year. With our example of 0.05, it would be 0.0001.
3. Place a 1 in front of the daily percentage rate. In our example, it would be 1.0001. The 1 represents the original deposit amount. Then, raise that to the 365th power. This will represent the compounded interest each day.
4. Use the number you got from the previous step and multiply that times your original deposit amount. This will give you your total amount of the certificate of deposit after it has matured. Notice that you answer is more than 5% of your original deposit. This is because interest is compounded each day.
5. Alter this formula if your certificate of deposit is longer than a year. Figure out the number of CD days and use this number instead of 365 in Step 3 only.
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