Heres what happens, you tell me the results.
I buy a 1 month CD at my local bank.
The initial deposit is $20,000
The interest rate is 4.74%.
Interest compounds daily.
APY is 4.85%.
How much will you end up with after 1 month?
Why pursue a 2 month CD at a bank, when you can just keep renewing your 1 month CD? For example, if a 2 month CD yields 4%, and a 1 month CD yields 3.5%, why not just get a 1 month cd and end up with 7% after 2 months? Is that how it works. Clear up my confusion FINANCIAL MASTERS!
2006-09-10 06:41:51 · 3 answers · asked by John R 1 in Business & Finance ➔ Investing
My friend and I are arguing over it
2006-09-10 06:46:13 · update #1
WOW, looks like CD's blow ***, ill stick to the stock market.
2006-09-10 06:50:22 · update #2
YOU do the math
2006-09-10 06:43:21 · answer #1 · answered by Anonymous · 0⤊ 2⤋
A CD interest rate is a YEARLY rate. Whatever rate is given, divide by 12 and that will give you the monthly interest rate.
Therefore, in this case, the 2 month CD is a better return on your investment than the 1 month CD.
That's the simple quick explanation.
2006-09-10 13:45:17 · answer #2 · answered by Zak 5 · 2⤊ 0⤋
Hey, I am just wondering how did you end up with $20,000, when you can not do such a simple math? :)
2006-09-10 13:59:54 · answer #3 · answered by OMaha999 1 · 2⤊ 0⤋