How to Calculate CD Interest Rate for College
- 1). Determine how long you have until you'll need the money for college. Don't choose a CD with a longer maturity period. For example, if you'll need the money in three years, don't choose a five-year CD.
- 2). Determine how much you can afford to put into the CD. Don't put money that you are likely to need before the maturity date into a certificate of deposit, because the early withdrawal penalties are steep.
- 3). Contact banks to get CD interest rates. The interest rate on your certificate of deposit will depend on the current market rates, the duration of the CD and the amount of money you can invest. The more money you put in and the longer you leave it in, the higher the rate of interest.
- 4). Calculate the amount of interest you will earn on your CD by using an online calculator (see resources) or the following formula, in which D is the deposit amount, R is the annual interest rate and T is the number of years:
Value at Maturity = D * (1+R/12)^(T*12)
For example, if you put $5,000 in a CD that paid 5 percent for four years, you would have $6,104.48 at maturity.
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