A certificate of deposit locks a fixed sum at a fixed rate for a set term, trading liquidity for a rate that's typically higher and more predictable than a regular savings account. This calculator applies the same compound-interest formula banks use on the account disclosure to project your maturity value, total interest, and equivalent APY.
Quick answer: Deposit + rate + term + compounding frequency → maturity value, total interest earned, and equivalent APY.
A = P × (1 + r/n)^(n×t) A = maturity value P = deposit (principal) r = nominal annual rate (decimal) n = compounding periods per year t = term in years Equivalent APY = (1 + r/n)^n − 1
Assumptions
Maturity value ≈ $10,512.67. Total interest ≈ $512.67. Equivalent APY ≈ 5.13%.
Maturity value ≈ $31,110. Total interest ≈ $6,110. Locking in the rate protects against future rate cuts — but also forgoes any rate increases over the 5-year term.
A certificate of deposit (CD) is a time deposit — you deposit a lump sum for a fixed term (e.g., 6 months, 1 year, 5 years) at a fixed interest rate, and the bank pays that rate for the full term regardless of what happens to market rates afterward. In exchange for that rate certainty, you generally can't withdraw the funds early without paying a penalty.
The rate (sometimes called the nominal or stated rate) is the base annual interest rate before compounding. APY (Annual Percentage Yield) is the actual effective annual return once compounding is factored in — it's always equal to or slightly higher than the nominal rate. Banks are required to disclose both under Regulation DD (Truth in Savings Act), and APY is the number to compare across banks since it already accounts for compounding frequency.
Most CDs charge an early-withdrawal penalty, commonly a forfeiture of a set number of months' interest (e.g., 3 months' interest on a 1-year CD, 6 months' on a longer term) — the exact penalty varies by bank and is disclosed at account opening. Some institutions offer 'no-penalty CDs' with a lower rate in exchange for withdrawal flexibility. Read the disclosure before committing funds you might need before maturity.
Yes, at FDIC-member banks, CDs are insured up to $250,000 per depositor, per institution, per ownership category — the same protection as a savings account. Credit union certificates carry equivalent NCUA insurance. Verify your institution's FDIC or NCUA status before depositing.
More frequent compounding produces a slightly higher effective yield at the same stated rate — daily compounding beats monthly, which beats quarterly, which beats annual. The difference is usually small (a few basis points of APY) but is exactly what separates the 'rate' from the 'APY' on the disclosure — use this calculator's frequency toggle to see the effect on your specific deposit.