5.75% High Yield CD Calculator APY

APY Calculation Formula:

\[ APY = 100 \times \left[\left(1 + \frac{r}{n}\right)^n - 1\right] \]

APY:

Final Balance after 1 year(s):

1. What is APY?

APY (Annual Percentage Yield) represents the real rate of return on your investment, accounting for compound interest. Unlike simple interest, APY considers how often interest is applied to your balance.

2. How Does This CD Calculator Work?

The calculator uses the APY formula:

\[ APY = 100 \times \left[\left(1 + \frac{r}{n}\right)^n - 1\right] \]

Where:

\( r \) — Annual interest rate (5.75% or 0.0575)
\( n \) — Number of compounding periods per year (365 for daily)

Explanation: The formula shows how daily compounding slightly increases the effective yield beyond the nominal 5.75% rate.

3. Understanding the 5.75% Rate

Details: This high-yield CD offers a competitive 5.75% interest rate with daily compounding, resulting in an APY of approximately 5.918%.

4. Using the Calculator

Tips: Enter your initial deposit amount and the CD term length in years. The calculator will show both the APY and your projected final balance.

5. Frequently Asked Questions (FAQ)

Q1: Why is APY higher than the stated interest rate?
A: The APY is higher due to compounding - interest earned each day begins earning additional interest.

Q2: Is the 5.75% rate guaranteed for the entire term?
A: Yes, CDs offer fixed rates for their entire term, unlike savings accounts with variable rates.

Q3: Are there penalties for early withdrawal?
A: Most CDs charge a penalty (typically several months' interest) for withdrawals before maturity.

Q4: How is this CD different from a savings account?
A: CDs typically offer higher rates but require you to lock up funds for the term, while savings accounts allow withdrawals.

Q5: Is the interest taxable?
A: Yes, CD interest is taxable as ordinary income in the year it's earned.