How to Calculate the Interest of a Bank CD

Figure out your interest earned

To calculate the interest you'll earn in a bank CD, you could use an online calculator. However, it's helpful to know how this calculation works. You'll find a link to an online calculator at the bottom of the page if you'd like to use it to check your work.

Things You'll Need

• calculator or spreadsheet program
• pen
• paper
• bank information

Instructions

1. First, find out how often your bank compounds interest on your CD and your interest rate.

2. Multiply your balance by your interest rate, then divide by 12. For example, if your balance is $1000 and your interest rate is 2%,
   1000 x .02 = 20/12 = $1.67

3. If your interest compounds monthly, add your result to your balance, and repeat step 2. For example,
   1000+1.67 = 1001.67
   1001.67 x .02 = 20.03/12 = 1.67

4. Continue repeating for each month you wish to calculate.

5. If your interest does not compound monthly, calculate it based on how often it does compound. Change the number you divide with to a number based on how often the interest compounds - 365 for daily, 2 for semiannually, et cetera. The period of time you calculate the balance for will also change dependent on how often it compounds. For example, if you're calculating daily compounding, you'll be figuring out each day's value at a time. For daily compounding, a spreadsheet or online calculator make it much easier.

Resources

• Bank CD Calculator