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Investing Using a CD Calculator

Investing Using a CD Calculator

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Have you ever opened a certificate of deposit at a particular rate and annual percentage yield (APY) but wondered how much interest your CD account will earn? Well you can figure this out before opening an account by using a certificate of deposit calculator or CD calculator if you will.

In fact, a CD calculator can help you figure out what CD term and CD rate to invest in. Sure, you can use a regular calculator to figure out how much interest a CD account will earn over all but with a CD calculator you can see how much interest you will earn using both the rate and APY. In effect you can see how compound interest works.

There are many CD calculators available but of course the calculators are not all the same and some are far better than others. There are some CD calculators that offer more features than others including how how often interest is compounded on the CD account. 

Don't know what compound interest is? Well compound interest is interest  earning interest. Confused?

Here's an example, say you have $100,000 in a 5 year CD that earns a CD rate of 2.50%, yes unfortunately the best CD rates on 5 year CDs are around 1.00%, the first earn the account earns $2,500 in interest. The second year the CD account has $102,500 in it, now the second year the 2.50% CD rate is on the account balance $102,500, earning $2,562.50,  $62.50 more in interest.

In this example interest was compounded annually but most CD accounts have interest compounded daily or monthly which will result in a higher APY and more interest earned.

So next time before you invest in a CD use a CD calculator to know how much the account will earn. You can also search for the highest CD rates right here at ratesorama.com using our CD rates list. We also have a list of the highest savings account rates and mortgage rates today.

Author: Stacy Everest
October 24th, 2011