How to Calculate Daily Interest on a CD
When you purchase a certificate of deposit (CD) you get a fixed interest rate guaranteed until the maturity (anywhere from three months to five years). The interest on most CDs is compounded (calculated and added to your balance) daily or monthly. It's a simple matter to calculate daily interest on a CD for a single day as long as you know the previous day's ending balance. Calculating daily interest on a CD for multiple days is more complicated. Fortunately, there's a formula if you have a programmable calculator or comparable computer software.
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Instructions
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1
Find the daily interest rate on the CD. The base rate a CD pays is the annual percentage of the principal amount of the CD a bank or credit union pays you for the use of your money. The daily interest rate is equal to the base rate divided by 365 (the number of days in a year). For example, if the base rate is 4.38 percent per year, the daily interest rate is 4.38 percent divided by 365 or 0.012 percent.
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2
Calculate interest for a single day. Multiply the balance in the CD by the daily interest rate. If you have a $10,000 CD with a daily interest rate of 0.012 percent, that's $10,000 times 0.012 percent. In this example the day's interest is $1.20, which you add to the balance of the CD for an ending balance of $10,001.20.
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3
Understand how compounded daily interest on a CD works. As soon as each day's interest is added to the CD, the additional money starts earning more interest. As a result, calculate each day's interest and use that day's ending balance for the following day's interest calculation.
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Use a formula to calculate daily interest on a CD for any number of days. For daily interest, the formula is T = B times (1 + r/365)^d -- B. T is the total interest earned and B is your starting balance. The "r" stands for the annual interest rate. The ^d symbol indicates that d (the number of days) is an exponent. Enter the data in your calculator or software according to its instructions. For the example used in Steps 1 and 2, the formula for 30 days interest would look like this: T =$10,000 times (1 + 0.048/365)^30 - $10,000.
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Tips & Warnings
The easiest and most practical way to calculate daily interest on a CD is to use a compound interest calculator tool. Many free calculators are available on the Internet
