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# Q&A: How Is Earnings Estimate Calculated In Depositaccounts.Com Rate Tables?

Saturday, June 12, 2010 - 1:21 PM
A reader asked me by email how is our earnings estimate in our CD rate table calculated.

The earnings estimate is the total interest that would be earned for the entire life of the CD. This includes the effects of compounding so it would require one not to take any interest payments. Here's an example for the Navy FCU 7-year CD for a \$10,000 initial deposit. Note the \$10,000 is the default deposit. This can be changed by clicking on the "filter account" button at the top of the table.

initial deposit = \$10,000
APY = 3.60%
Total balance year 0 = \$10,000
Total balance year 1 = \$10,000 * 1.036 = \$10,360
Total balance year 2 = \$10,360 * 1.036 = \$10,733
Total balance year 3 = \$10,733 * 1.036 = \$11,119
Total balance year 4 = \$11,119 * 1.036 = \$11,520
Total balance year 5 = \$11,520 * 1.036 = \$11,934
Total balance year 6 = \$11,934 * 1.036 = \$12,364
Total balance year 7 = \$12,364 * 1.036 = \$12,809

Final value at maturity = \$12,809
Principal = \$10,000
Accrued interest (earnings estimate) = \$2,809

If one took interest payments at the end of each year, the total interest earned would be a little lower (.036*\$10,000*7 = \$2,520).
2
Ken Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708