# CD Calculator

A Certificate of Deposit (CD) is a financial product that is offered by banks and credit unions. It is a type of savings account that pays a fixed interest rate for a fixed period of time. The interest rate is usually higher than that of a regular savings account, and the longer the term of the CD, the higher the interest rate. A CD Calculator is a tool that helps you calculate the interest earned on your CD investment.

## Concepts

A CD Calculator uses the following concepts to calculate the interest earned on your CD investment:

### Principal

The principal is the amount of money you invest in the CD.

### Interest Rate

The interest rate is the percentage of the principal that you earn as interest over the term of the CD.

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### Term

The term is the length of time for which you invest in the CD.

### Compounding Frequency

Compounding frequency refers to how often interest is added to your investment. The more frequently interest is compounded, the more interest you will earn.

### Annual Percentage Yield (APY)

The APY is the effective annual rate of return taking into account the effect of compounding interest.

## Formulae

The formula for calculating the interest earned on a CD investment is:

``````Interest Earned = Principal * (1 + (Interest Rate / Compounding Frequency)) ^ (Compounding Frequency * Term) - Principal
``````

The formula for calculating the APY is:

``````APY = (1 + (Interest Rate / Compounding Frequency)) ^ Compounding Frequency - 1
``````

## Benefits

Here are some benefits of using a CD Calculator:

• Accuracy: A CD Calculator helps you calculate your earnings accurately, taking into account compounding frequency and term.
• Comparison: A CD Calculator helps you compare different CDs and their respective earnings.
• Planning: A CD Calculator helps you plan your investments by showing you how much you can earn over different terms and compounding frequencies.

## Interesting Facts

Here are some interesting facts about CDs:

• CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to \$250,000 per depositor per bank.
• CDs are considered low-risk investments because they are insured and offer a fixed rate of return.
• CDs can have terms ranging from a few months to several years.

## Use Cases

Here are some use cases for a CD Calculator:

• Investment Planning: A CD Calculator can help you plan your investments by showing you how much you can earn over different terms and compounding frequencies.
• Comparison Shopping: A CD Calculator can help you compare different CDs and their respective earnings.
• Budgeting: A CD Calculator can help you budget your finances by showing you how much money you will have at the end of your investment term.
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