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

Ken Tumin
Ken Tumin   |     |   5,687 posts since 2009

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).