6 Month CD Rates Calculator

6 Month CD Formula:

\[ A = P \times (1 + \frac{r}{365})^{(365 \times 0.5)} \]

Final Amount (A):

Interest Earned:

1. What is a 6-Month CD?

A 6-month Certificate of Deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time (6 months) and pays a fixed interest rate. CDs generally offer higher interest rates than regular savings accounts.

2. How the Calculator Works

The calculator uses the compound interest formula for daily compounding:

\[ A = P \times (1 + \frac{r}{365})^{(365 \times 0.5)} \]

Where:

\( A \) — Final amount including principal and interest
\( P \) — Principal investment amount
\( r \) — Annual interest rate (in decimal)
365 — Number of compounding periods per year
0.5 — Time period in years (6 months)

Explanation: The formula accounts for daily compounding of interest over the 6-month period.

3. Benefits of 6-Month CDs

Details: 6-month CDs offer higher yields than savings accounts while providing more liquidity than longer-term CDs. They're ideal for short-term savings goals when you know you won't need the money for at least 6 months.

4. Using the Calculator

Tips: Enter your principal amount in dollars, the annual interest rate (APY) as a percentage. For example, for Marcus's 4.80% APY CD, enter 4.80 in the rate field.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APY and APR?
A: APY (Annual Percentage Yield) includes compound interest, while APR (Annual Percentage Rate) doesn't. CD rates are typically quoted as APY.

Q2: Are CD interest rates fixed?
A: Yes, the rate is fixed for the entire term of the CD when you open the account.

Q3: What happens if I withdraw early?
A: Most banks charge an early withdrawal penalty, typically several months' worth of interest.

Q4: Are CD earnings taxable?
A: Yes, interest earned on CDs is taxable as ordinary income in the year it's earned.

Q5: How does this compare to a high-yield savings account?
A: CDs typically offer slightly higher rates than savings accounts, but your money is locked in for the term. Savings accounts offer more flexibility.