Q: I have some extra money to invest in a jumbo CD. There are so many options with great interest rates, but how do I chose which to invest in?
A: Many banks and financial sites offer online CD rate calculators like this one at Bankrate.com.
Plug in values for your initial deposit, interest rate, investment term and compound frequency, and the calculator will show you exactly how much you’ll make with a nifty graph.
Use the term “CD yield calculator” to search for additional calculators using your favorite search engine.
If you know the annual percentage yield, or APY, you can calculate the value of your account after one year with some quick math: multiply your initial investment by 1 + APY for an account total after one year. For example, $50,000 invested for one year at an APY of 2.50% becomes 50,000 * 1.025, or $51,250.
If you don’t have the APY, you can calculate it using the APR, or annual percentage rate, like this:
APY = (1+ (APR/compound frequency))compound frequency – 1
In a spreadsheet, it looks like this:
where A1 is the cell containing the APR and B1 is the compounding frequency.
In addition to the handy dandy yield calculator, Bankrate.com also offers a best rate search that can help you find the best rates based on your deposit amount and term length. Bankrate.com is not affiliated with a financial institution (or this website), and is a trusted, neutral source within the banking industry.