- 1). Determine what the interest rate on your CD is and how your interest is compounded--whether it be daily, monthly, semi-annually or annually.
- 2). Express the interest rate in decimal form. For instance, if your interest rate is 8 percent, it would be expressed as 0.08.
- 3). Divide the interest rate by how your CD is compounded to determine how much interest your CD earns daily, monthly, semi-annually or annually. For instance, if your interest is compounded daily, you would divide 0.08 by 365 to determine how much interest your CD earns in one day, which (in this example) is 0.0002. If your interest is compounded monthly, you would divide the interest rate by 12. If it is compounded semiannually, you would divide it by 2, and if it is compounded annually, no division would be necessary. For instance, in this example: 0.08/365 = 0.0002.
- 4). Add 1 to the daily interest rate so that the figure equals the principal and the interest. In the example, 1 plus 0.0002 would equal 1.0002.
- 5). Compound the interest by raising it to the 365th power to determine how the interest compounds. In this example, 1.0002 raised to the 365th power equals 1.0833.
- 6). Multiply the value of your CD by the compounded figure to determine the rate return on your CD in one year. For instance, a $1,000 CD multiplied by 1.0833 would be worth $1,083 at the end of a year, meaning that the rate return on the CD was $83 over a one-year period.
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