How to Calculate Gain on Matured CD
A certificate of deposit (CD) is an account offered by banks and other financial institutions that entices customers with a higher interest rate in exchange for keeping the money in the CD for a specified period of time. To calculate how much you will have earned when the CD matures, you need to know how much you put in, how often the interest compounds, how long you are leaving the money in the account and the interest rate.
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Instructions
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1
Calculate the periodic interest rate on the CD by dividing the annual interest rate by the number of times per year the interest is compounded. If your CD compounds interest each month and pays 3 percent per year, the periodic rate would be 0.25 percent.
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2
Divide the periodic rate by 100 to convert it to a decimal. Continuing the example, you would get 0.0025.
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3
Add 1 to the periodic rate from Step 1. Continuing the example, you would get 1.0025 percent.
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4
Multiply the number of times per year interest is compounded by the number of years, or parts of a year, that you are leaving the money in the CD. If you have a 3.5-year CD with interest compounded monthly, multiply 3.5 by 12 to get 42.
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5
Raise the result from Step 2 to the nth power, where N is the result from Step 4. Continuing the example, raise 1.0025 to the 42nd power to get 1.110565082.
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6
Subtract 1 from Step 5. Continuing the example, you would get 0.110565082.
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7
Multiply the result from Step 6 by the amount of money you invested in the CD. If you invested $5,000, you would gain $552.83 when the CD matures after 3.5 years.
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