About this calculator
The CD Calculator lets you estimate the growth of your money in a Certificate of Deposit (CD).
How to use the CD calculator
Step by step guide on using the CD calculator
- Enter your Initial Deposit, the amount of money you plan to invest in the CD.
- Input the Interest Rate offered by the bank for the CD.
- Select the Compound Frequency (e.g., annually, semi-annually, quarterly, or monthly) to determine how often interest is added to your balance.
- Enter the Deposit Length, the total time you plan to keep your money in the CD.
- Specify your Marginal Tax Rate to account for taxes on the interest earned.
- The calculator will automatically compute your Final Balance, showing how much money you will have at the end of the CD term after compounding and taxes.
- It will also display the Interest Earned, the total profit generated from your deposit during the term.
What is a certificate of deposit?
A Certificate of Deposit (CD) is a kind of savings account provided by banks and financial institutions whereby you can deposit funds over a specific period of time with a fixed interest rate. In a CD, in contrast to the usual savings account, the amount of money is usually tied up until the end of the period, which may be a few months or a number of years. The bank offers a better interest rate than ordinary savings accounts, and in exchange, they do not charge on your money at all, and the interest rate is usually compounded, which means that your money will grow more effectively in the long run. Early withdrawal of funds normally attracts a penalty, which makes the savers leave their deposit unattended over the stipulated time. CDs can be said to be a low-risk investment since most of them are usually insured by the government through deposits protection programs, hence are a safe way to make predictable interest income without risking capital loss.
How does a certificate of deposit work?
The Certificate of Deposit (CD) operates on the principle that you can open a fixed sum of money in a bank or financial institution to have over a certain period, which is referred to as the term. When you open a CD, the bank is willing to make a specific rate of interest on the term, and it may be on a daily, monthly, quarterly or annual basis based on the CD. Your principal will usually be locked away, that is, you cannot retrieve the funds without paying an early withdrawal penalty, at this time. You get back the fact sheet amount of your deposit at the end of the term, also known as the maturity date, with the interest accrued. The more the term and the interest rate the more your money will grow. CDs are regarded as a low-risk investment since they can be insured by the government deposit protection plans, and such a source would provide a safe method of earning predictable interest as well as keeping your money safe.