$10,000 x 2.25% = $225 of interest
That's the "simple" interest method. How often is it compounded? That will change the result slightly.
That's a pretty good rate for a 1 year CD.
I was wondering if someone could help me figure out how to tell what i would earn on a cd. What is the formular for figuring it? Say like if i put $10,000 dollars in a 1 year cd at 2.25 percent with an APY of 2.26 how much interest would it earn.
$10,000 x 2.25% = $225 of interest
That's the "simple" interest method. How often is it compounded? That will change the result slightly.
That's a pretty good rate for a 1 year CD.
Last edited by deathb4disco; 02-21-2009 at 08:49 PM.
Your bank should be able to tell you what it will be.
Fatman
no problem, i had a good buddy not understand it and was kind of torqued off after 6 mo.
i have a small savings account and the rest of my savings is divided up into 5ths. then each one is in a staggered 1 yr cd that is a revolving cd. 4 times a year i go into the bank sign some forms to move them from one cd to the next. that way i don't have it all locked up and if i need it, i have 1/5 of it in my savings readily available and am just a few months from the other if i need it without taking penalties...
Annual Percentage Rate (simple interest) in the example was quoted as 2.25% for one year. The Annual Percentage Yield (compounded interest) was quoted as 2.26%. Banks and other "financial" organizations that sell Certificates of Deposit are required by Federal Law to quote A.P.Y. using quarterly compounding factor.
The calculation for the first quarter is: Principal X Interest Rate / 365 days X Number of days in the quarter. The next quarter calculation is: Original Principal + Interest Paid from the prior quarter (the new principal total if compounding) X Interest Rate / 365 X Number of days in the quarter.
Doing this four times for a one year certificate and dividing the total earned by the original principal will give you the yield.
IMPORTANT POINT: Everyone that sells Certificates of Deposit are required to quote the Annual Percentage Yield for "comparison purposes." Everyone quotes APY, but they are not required to compound. So if they do not compound, their true yield is the rate they quote not the yield...your federal government at work! When you make a purchase make sure you are getting the compounding feature.
Gadget Man