1. What is the Marcus CD Formula?

The Marcus CD formula calculates the final amount of a Certificate of Deposit (CD) investment with daily compounding interest. It's particularly useful for Marcus CDs which typically offer competitive rates like 3.90% APY for 20-month terms.

2. How Does the Calculator Work?

The calculator uses the daily compounding formula:

Where:

• \( A \) — Final amount ($)
• \( P \) — Principal investment ($)
• \( r \) — Annual interest rate (decimal, e.g., 0.039 for 3.9%)
• \( t \) — Time in years

Explanation: The formula accounts for daily compounding (365 times per year) which maximizes your returns compared to simple interest or less frequent compounding.

3. Importance of CD Calculations

Details: Accurate CD growth projections help investors compare different CD terms and rates, plan for financial goals, and understand the power of compound interest.

4. Using the Calculator

Tips: Enter principal in dollars, annual rate as a decimal (e.g., 0.039 for 3.9%), and time in years (e.g., 1.67 for 20 months). All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Why daily compounding?
A: Daily compounding means interest is calculated and added to your balance every day, leading to slightly higher returns than monthly or annual compounding.

Q2: How does this compare to APY?
A: The formula calculates the actual growth, while APY (Annual Percentage Yield) shows the effective annual rate including compounding effects.

Q3: Are there penalties for early withdrawal?
A: Most CDs including Marcus impose penalties for early withdrawal, which aren't accounted for in this calculator.

Q4: Are CD rates guaranteed?
A: Yes, CD rates are fixed for the term, unlike savings accounts which may have variable rates.

Q5: How are taxes handled?
A: Interest earned is taxable as ordinary income in the year it's credited, though this calculator doesn't account for taxes.