Q. How do I calculate what a certificate of deposit will be worth at maturity? Is there a formula?

A. The easiest way is to use our CD calculator, which will do all the work for you. There's also a calculator that shows how to maximize your earnings by laddering your CDs.

If you really want to do the work by hand, here's the formula for CDs that have interest compounded daily:

Take the interest rate and express it in decimal form: 8% = 0.08, 10% = 0.10, etc. That figure is divided by 365 to break it into the amount of interest that would be earned in one day -- yes, this is a real small number. In the case of using 8% (0.08), 0.08/365 = 0.0002.

Now you need to compound the figure, so the interest gained on day one also gains interest on day two, and that new pile of interest all gains interest on day three, etc. To do that, take the daily interest rate (0.0002), add 1 to it so the new number represents the principal and interest for one day (1.0002) and raise it to the power of 365 to account for the compounding factor. In our 8% (0.08) example, that's 1.0002 to the 365th power, which equals 1.0833.

Finally, multiply the value of your CD by 1.083 to obtain how much you'd earn over a full year. That means a $1,000 CD would be worth $1,083 at the end of a year.

See why we urge you to use the calculator?interest.com

Have a question about your finances? Ask us at editors@interest.com.

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