How to calculate CD interest

By Avery Shaw. Published July 28, 2026.

To calculate CD interest, multiply your deposit by (1 + APY) raised to the power of the term in years, then subtract the deposit. A $10,000.00 CD at 4.50% APY for one year is 10,000 × 1.045, which comes to $10,450.00, so the interest is $450.00.

The formula for CD interest

One formula covers every fixed-rate CD:

maturity value = deposit × (1 + APY)^(term in years)

interest earned = maturity value − deposit

The term goes in as a fraction of a year. Six months is 0.5, eighteen months is 1.5, five years is 5. That single exponent handles every term length, which is why you do not need a separate method for CDs shorter or longer than a year.

Worked example: a $10,000.00 CD at 4.50% APY

Take $10,000.00 at a hypothetical 4.50% APY and run it over three terms. Every figure below comes from the formula above.

Interest on $10,000.00 at a hypothetical 4.50% APY
Term	Calculation	Interest	Value at maturity
6 months	10,000 × 1.045^0.5	$222.52	$10,222.52
1 year	10,000 × 1.045^1	$450.00	$10,450.00
5 years	10,000 × 1.045^5	$2,461.82	$12,461.82

Notice the six-month figure. It is $222.52, slightly less than half of the one-year $450.00, because you do not get to compound the second half of the year. Half the time is not quite half the interest.

Start from APY, not the interest rate

This is where most CD arithmetic goes wrong. APY already includes the effect of compounding. It is the annualized number after compounding has been applied, which is precisely why US banks are required to advertise it: CFPB Regulation DD defines annual percentage yield as a rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding.

So if you take a 4.50% APY and run it through a monthly compounding formula, you compound a number that was already compounded. On $10,000.00 that produces $10,459.40, overstating the interest by $9.40. Small on one CD, and wrong in a way that grows with the deposit and the term.

The rule is short. If the bank gave you an APY, use it directly with the formula above and do not apply a compounding frequency again.

If you only have the nominal interest rate

Some disclosures lead with the nominal annual interest rate instead. Convert it to APY first, then use the same formula. With n compounding periods per year:

APY = (1 + rate ÷ n)^n − 1

A 4.50% nominal rate compounded monthly works out to 4.594% APY. The conversion runs the other way too: a 4.50% APY corresponds to a nominal rate of about 4.410% compounded monthly. The calculator does this under Advanced options, and APY versus interest rate covers the distinction in more detail.

A longer worked example: $25,000.00 for 18 months

Terms that are not whole years use the same exponent, just fractional. At a hypothetical 4.10% APY, $25,000.00 over 18 months is 25,000 × 1.041^1.5, giving $26,553.15 and interest of $1,553.15. There is no separate rule for 18 months, 9 months or 30 months. The exponent is simply the months divided by 12.

Why your bank's number may differ slightly

The formula gives a clean estimate. A bank's ledger has more moving parts, and a few dollars of difference on a large deposit is normal rather than a sign anyone made a mistake.

Day count. This estimate treats 12 months as exactly one year, while a bank may count actual days, which makes leap years and month lengths matter.
Crediting schedule. Interest credited monthly or quarterly, rather than at maturity, can round at each step.
Payout terms. A CD that pays interest out instead of leaving it on deposit will not compound the way this formula assumes.
Taxes. Every figure here is pre-tax, and CD interest is generally taxable as ordinary income.

Treat the result as a close estimate for comparing accounts, and confirm the exact figure with the bank before you rely on it. Our methodology page documents every assumption behind these calculations.