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#725999 - 05/03/07 02:08 PM CD APY - Interest
Tocomply Offline
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Joined: Nov 2004
Posts: 650
Question on interest calculations for CD's. When a bank advertises an APY rate for a CD lasting more than a year, does that mean that the APY is calculated based on the original deposit for the entire period or does it mean that the APY is based on the balance at the start of each new year?

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#726026 - 05/03/07 02:37 PM Re: CD APY - Interest Tocomply
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
For a deposit with a defined term (a CD, for example), you calculate the interest to be earned over the entire term, and then apply the APY formula.

Your calculation of the interest amount has to take into account the interest crediting and compounding that will apply to the account.
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