How is CD interest calculated?
A CD earns compound interest: A = P(1 + r/n)^(nt), where P is your deposit, r the APY as a decimal, n the compounding periods per year, and t the term in years. Because the rate is fixed, you can calculate your exact payout the day you open it.
A certificate of deposit pays a fixed rate for a fixed term, so — unlike a savings account — you can calculate your exact earnings up front.
The formula
A = P × (1 + r / n)n·t
- A — final balance
- P — principal (your deposit)
- r — annual rate as a decimal (e.g. 0.045 for 4.50%)
- n — compounding periods per year (often 12)
- t — term in years
Worked example
$10,000 in a 12-month CD at 4.50% APY, compounded monthly, grows to about $10,459 — roughly $459 in interest. A 5-year CD at the same rate would earn far more thanks to compounding over time.
Skip the math
Use the free KCBanks CD calculator to see your exact payout for any amount, rate, and term, then compare it against today's best CD rates in Kansas City. Remember that withdrawing before maturity usually triggers an early-withdrawal penalty.