Calculate CD Maturity Amount
CDs, or certificates of deposit, are accounts offered at banks and other financial institutions. CDs are not very liquid because you cannot withdraw money from the account until it matures or you will have to pay a penalty, usually equal to several months of interest. The maturity dates of CDs range from a few months to 10 years or more.
Instructions
1. Determine the amount of money you will put into the CD, the time until it matures, the annual interest rate the CD will earn and how many times per year interest is compounded.
2. Divide the annual interest rate by the number of times per year the interest is compounded. For example, if the annual interest rate is 3 percent and interest is compounded monthly, you would divide 0.03 by 12 to get 0.0025.
3. Add 1 to the number found in Step 2. For example, if you had 0.0025, you would get 1.0025.
4. Multiply the number of times per year interest is compounded by the number of years until the CD matures. For example, if interest is compounded monthly and the CD matures in three years, you would multiply 12 by 3 to get 36. If your CD matures in less than a year, convert it to a decimal to represent the number of years by dividing by 12. For example, if your CD matures in 9 months, divide 9 by 12 to find the CD will mature in 0.75 years, then multiply that number by the number of times per year the interest is compounded.
5. Raise the number found in Step 2 to the power of the number found in Step 4. For example, you would raise 1.0025 to the 36th power and get about 1.094. You can use a scientific calculator to do this by using the y^x function.
6. Multiply the amount of money you put into the CD by the number found in Step 5. For example, if you put $5,000 in the CD, you would multiply it by 1.094 to find the value at maturity would be $5,470.26.
Tags: interest compounded, found Step, number found, number found Step, times year
