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Understanding Interest Rate and APY of a Short-Term CD

Wednesday, February 24, 2010 - 8:07 AM
If your 6-month CD has a 1.50% APY, it does not mean you'll get a 1-year return of 3%. Interest rates and yields are annualized. So after 6 months with a 1.50% APY, your deposit will grow just under 0.75%. Dr. Don at Bankrate has a good review of APY and interest rates in his today's Q&A. His reader mentioned a 2.26% 6-month CD. The reader email must be old because it's very hard to find 6-month CDs today with rates over 1.50%.
Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
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