How to Find Out How Much Certificate of Deposits Are Worth

How to Find Out How Much Certificate of Deposits Are Worth
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When you buy a certificate of deposit, you're committing to deposit a specified amount of money for a specified period of time so that you can earn interest on your deposit. Most CDs have an investment period between ​three months and 10 years​, and banks may charge a penalty if you take the money out before the deposit fully matures. When the certificate of deposit matures, you'll receive the money that you originally invested, as well as any accrued interest. Determining the value of your CD requires a few calculations.

Read the Fine Print

Read the disclosure statements for your certificate of deposit that the bank gave you when you acquired the CD. Pay particular attention to fine print regarding the terms of the certificate of deposit, including the interest rate, amount of months for the certificate of deposit and amount of the deposit. You'll need this information to calculate how much interest you have earned on the deposit and, therefore, how much the certificate is worth from time to time. Contact the bank where the certificate of deposit was made if you do not have this information.

Use an Online Calculator

Plug in the terms into an online calculator. Heartland Credit Union and First State Bank offer such calculators in which you enter the amount of the deposit, interest rate and number of months that the CD has had to mature. These calculators also offer a selection for how often interest compounds, which occurs when the interest is added to the principal.

Perform a Manual Calculation

Use the following compound interest formula if you do not have access to a computer or if the terms don't fit within the calculator's framework:

A = P(1 + r/n) ^ nt.

In this equation, r is equal to the annual interest rate and is expressed as a decimal. P is the amount you deposited, n is the number of times the interest is compounded in a year and t is the number of years before the account matures. A represents the final value of the certificate of deposit, including all interest that accrues during the time period.

CD Example Calculation

For instance suppose you deposited $500 in a 5-year certificate at a rate of 2 percent annual percentage yield. Interest is compounded twice a year. The calculation is:

A = 500(1+.02/2)^(2*​5)​ A= 500 (1.01) ^ 10
A = 500(1.10) = ​$550

When the certificate matures, it will be worth $550.

Check for Penalties

Check the fine print for any early withdrawal penalties.You may have to pay a one-time fee like $50 to get your money out early, or you may forfeit a chunk of interest. Penalties between one month and 12 months worth of interest are relatively common, depending on the term of your CD.

If you're the sole owner of a brokered CD, you might be able to pay a penalty to the bank and get your money bank. However, if you're a co-owner with other customers, your broker will have to find a buyer for your portion, and you may suffer a loss of your original deposit if the CD has to sell it at a discount.

Things to Consider

Some CDs might automatically renew at maturity if you don't withdraw the funds within a specified period of time. This situation may close the window in which you can withdraw the funds without penalty. Additionally, the CD may mature at the same rate at which you originally invested it, but this may not be a favorable interest rate in the present time period.

Other CDs have call features, meaning that a bank can call the CD after a fixed period of time, decreasing the amount of time for the interest to accumulate and the ability of an investor to lock in an attractive rate.