High Yield CD Calculator

Compound Interest Formula:

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

Principal Amount (P):

Annual Interest Rate (r):

Term Length (t):

years

Compounding Frequency (n):

Final Amount (A):

Interest Earned:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods. It causes wealth to grow faster than simple interest, where interest is calculated only on the principal amount.

2. How the Calculator Works

The calculator uses the compound interest formula:

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

Where:

$ A $ — Final amount including interest
$ P $ — Principal investment amount
$ r $ — Annual interest rate (decimal)
$ n $ — Number of times interest is compounded per year
$ t $ — Time the money is invested for (in years)

Explanation: The more frequently interest is compounded, the greater the return on investment due to the "interest on interest" effect.

3. Understanding High-Yield CDs

Details: High-yield Certificates of Deposit (CDs) offer higher interest rates than traditional savings accounts in exchange for locking in funds for a set term. Rates are typically fixed and FDIC-insured up to $250,000 per depositor.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (APY), term length in years (can use decimals for partial years), and select compounding frequency. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APY and APR?
A: APY (Annual Percentage Yield) includes compound interest effects, while APR (Annual Percentage Rate) does not. For CDs, APY is the more relevant metric.

Q2: Are there penalties for early withdrawal?
A: Most CDs charge a penalty (typically several months' interest) for withdrawing funds before maturity.

Q3: How does compounding frequency affect returns?
A: More frequent compounding (e.g., daily vs. annually) yields slightly higher returns, though the difference diminishes at higher frequencies.

Q4: Are CD rates guaranteed?
A: Fixed-rate CDs lock in the rate for the term. Some banks offer bump-up or step-up CDs with variable rates.

Q5: What happens when a CD matures?
A: Most banks offer a grace period to withdraw or reinvest funds, often at then-current rates if not specified otherwise.