1. What is a 10-Month CD?

A 10-month Certificate of Deposit (CD) is a time deposit that earns interest at a fixed rate for a 10-month term. CDs typically offer higher interest rates than regular savings accounts in exchange for keeping your money deposited for the full term.

2. How Does the Calculator Work?

The calculator uses the daily compounding formula:

Where:

• \( A \) — Final amount ($)
• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (decimal)
• 365 — Days in a year for daily compounding
• 10/12 — 10 months expressed as fraction of a year

Explanation: The formula calculates how your principal grows with interest compounded daily over 10 months.

3. Understanding Daily Compounding

Details: Daily compounding means interest is calculated and added to your principal every day, which results in slightly more earnings than monthly or annual compounding.

4. Using the Calculator

Tips: Enter your principal amount in dollars and the annual interest rate as a percentage (e.g., 2.5 for 2.5%). The calculator will show your final balance after 10 months and total interest earned.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APY and APR?
A: APR is the annual rate without compounding, while APY includes compounding effects. This calculator shows actual growth including compounding.

Q2: Are there penalties for early withdrawal?
A: Most CDs charge a penalty (often several months' interest) for withdrawing before the term ends.

Q3: How does this compare to a savings account?
A: CDs typically offer higher rates than savings accounts but require you to lock in your money for the full term.

Q4: Are CD interest rates fixed?
A: Traditional CDs offer fixed rates, but some banks offer bump-up or variable-rate CDs.

Q5: Is the interest taxable?
A: Yes, CD interest is taxable as ordinary income in the year it's earned, unless in a tax-advantaged account.