5 Year High Yield Calculator

Compound Interest Formula:

\[ A = P \times \left(1 + \frac{r}{365}\right)^{365 \times 5} \]

Final Amount After 5 Years (A):

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1. What is the 5 Year High Yield Calculator?

The 5 Year High Yield Calculator estimates how much your savings will grow over 5 years with daily compounding interest, typical of high-yield savings accounts or certificates of deposit (CDs).

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times \left(1 + \frac{r}{365}\right)^{365 \times 5} \]

Where:

$ A $ — Final amount after 5 years ($)
$ P $ — Principal investment amount ($)
$ r $ — Annual interest rate (decimal)
365 — Number of compounding periods per year (daily)
5 — Number of years

Explanation: The formula accounts for daily compounding, which means interest is calculated and added to the principal every day, leading to exponential growth.

3. Importance of Compound Interest

Details: Compound interest is powerful because you earn interest on both your original money and on the interest you keep accumulating. Over time, this can significantly boost your savings growth.

4. Using the Calculator

Tips: Enter your principal amount in dollars and annual interest rate as a percentage (e.g., 3.5 for 3.5%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does this compare to monthly compounding?
A: Daily compounding typically yields slightly more than monthly compounding because interest is calculated and added more frequently.

Q2: Is this calculator accurate for all high-yield accounts?
A: Most high-yield savings accounts compound daily, but always check your specific account terms as some may compound monthly or quarterly.

Q3: What's the difference between APY and APR?
A: APR is the annual rate without compounding, while APY includes compounding effects. This calculator uses APR for input but shows APY-like results.

Q4: How do taxes affect these calculations?
A: Interest earnings are typically taxable, which would reduce your actual returns. This calculator shows pre-tax growth.

Q5: Can I use this for investment accounts?
A: This is designed for fixed-rate accounts. Investments with variable returns would require different calculations.