Enter an initial deposit, an interest rate (%), and the term of a certificate of deposit into the CD calculator to determine the final value of the CD.

CD Return Formula

The following formula is used to calculate the return or final value of a certificate of deposit.

FV = IV (1 + r/m) ^ (t * m)

  • Where FV is the final value
  • IV is the initial value or deposit
  • r is the annual interest rate
  • m is the compounding frequency per year
  • t is the number of years.

The initial value or deposit refers to the amount of money or assets contributed or invested at the beginning of a financial transaction or investment.

The annual interest rate is the percentage of the loan or investment amount that is charged or earned on an annual basis.

The compounding frequency per year refers to the number of times that interest is added to an investment or loan account within 12 months.

Number of years refers to the length of time measured in a count of years.

What is CD (certificate of deposit) Return?

A CD (certificate of deposit) return refers to the money you earn from investing in a certificate of deposit. When you deposit your money into a CD, you agree to keep it there for a specific period, known as the term. In return for locking your money away, the bank or financial institution promises to pay you a fixed interest rate on your investment.

The CD return is the interest you receive on top of the initial amount you invested. It is usually expressed as an annual percentage rate (APR) or annual percentage yield (APY). The rate is predetermined and remains fixed throughout the term of the CD, regardless of any fluctuations in the market.

The longer the term of the CD, the higher the potential return, as banks often offer higher interest rates for longer commitments. Different banks may offer different rates, so it’s important to shop around and compare offers to get the best return on your investment.

CD returns can be an attractive option for individuals seeking a low-risk investment. Since the interest rate is fixed, you know exactly how much you will earn at the end of the term. This predictability makes it easier to plan for financial goals or upcoming expenses.

It’s important to note that CD returns are typically lower compared to other investment options, such as stocks or mutual funds. This is because CDs are considered safer investments, and the returns reflect this lower level of risk. Additionally, withdrawing your money before the CD matures may result in penalties, impacting your overall return.

How to calculate the return on a certificate of deposit?

How to calculate the return on a certificate of deposit?

  1. Determine the total initial value

    This would be equal to the total cost of the CD times the number of certificates purchased

  2. Determine the rate of return

    Determine the yearly rate of return of the CD in percent

  3. Determine the total term of the CD

    Find out how long the CD is invested for in the number of years.


What is a certificate of deposit

A certificate of deposit, or CD, is an investment that typically yields higher returns than a savings account but has a fixed term length and must be re-drawn at the end of the investment term.

Is a certificate of deposit better than a savings account?

That depends on the individual. The CD is a highly safe investment that will return a fixed %, but will also keep your money locked up for the term.

Certificate of Deposit or Stocks

It’s best to keep a balance of both CDs and stocks in an investment portfolio. CDs are incredibly safe but won’t yield the same returns as other investments.

certificate of deposit return calculator
cd return formula