Obtain a certificate of deposit from a bank.
Certificates of deposit (CDs) secure money that customers do not need in the short term but do not want to risk losing. CDs guarantee a set interest rate over a stated period, with the higher rates being reserved for larger deposit amounts and longer CD terms. To calculate the interest a CD will provide, you need to know the interest rate, the term of the CD, the amount deposited and how often interest compounds.
Instructions
1. Contact your bank to find out how often the interest on the CD will be compounded.
2. Divide the annual interest rate by the number of times interest will be compounded each year. For example, if interest compounds quarterly and the annual rate equals 3 percent, you would divide 3 by 4 to find the periodic interest rate equals 0.75 percent.
3. Convert the periodic interest rate to a decimal by dividing by 100. In this example, you would divide 0.75 percent by 100 to get 0.0075.
4. Add 1 to the periodic rate expressed as a decimal. Furthering the example, you would add 1 and 0.0075 to get 1.0075.
5. Multiply the result from step 4 by itself N times, where N is one less than the number of times in the term of the CD interest compounds. In this example, if the CD matured in one year, interest would compound four times so you would multiply 1.0075 by itself three times (1.0075 times 1.0075 times 1.0075 times 1.0075) to get 1.030339191.
6. Subtract 1 from the result from step 5 to calculate the interest rate over the term of the CD. In this example, you would subtract 1 from 1.030339191 to get 0.030339191.
7. Calculate the interest on the CD by multiplying the original deposit by the interest rate over the term of the CD. Finishing the example, if your CD's original deposit equals $1,200, you would multiply $1,200 by 0.030339191 to find the interest on the CD would be $36.41.
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