DEFINITION OF CD: Certificate of Deposit

Definitions

Initial deposit

The starting balance for your CD.

Months

The total number of months for this CD to mature.

Interest rate

The published interest rate for this CD. Make sure to enter the actual interest rate, not the Annual Percentage Yield (APY).

Annual percentage yield (APY)

This is the effective annual interest rate earned for this CD. A CD's APY depends on the frequency of compounding and the interest rate. Since APY measures your actual interest earned per year, you can use it to compare CD's of different interest rates and compounding frequencies.

Compounding

Interest earned on your CD's accumulated interest. The more frequently this occurs, the sooner your accumulated interest income will generate additional interest. You may wish to check with your financial institution to find out how often interest is being compounded on your particular CD.

This article was taken from:DINKYTOWN