Let's say I purchase a CD at for $1,000 at 5% for 1 year. Does that mean I get 5% per month, or just 5% for the whole year?
50 bucks a month or 50 bucks a year?
2007-02-03 00:57:19 · 6 answers · asked by ? 2 in Business & Finance ➔ Personal Finance
Let's start with this, when someone is quoting you a CD rate they should quote you the APY (Annual Percentage Yield) first and the Rate second. Also they should tell you how long of a term the rates are for. The APY is the percentage you will get on the amount invested if you let your money sit there until the CD Matures (expires). The Rate is what you will get if you get a check sent to you monthly for the interest earned for that month.
Example:
Let's say you invest $1,000 for 1 year. Let's say they give you an APY of 5% and the rate 4.89%. If you let the money sit there for a year and let interest build you will end up earning $50.01. If you get the interest monthly you will be receiving around $4.17 a month.
In realistic terms with that amount of money I really do not believe you will find someone who will give you that high of a rate and the term may be a little over a year and you may be better off putting it into a Money market account that way your money won't be tied up in the even that you need it.
2007-02-03 03:23:23 · answer #1 · answered by laurel 3 · 1⤊ 0⤋
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RE:
How does a certificate of deposit (cd) work? Does it pay the % monthly?
Let's say I purchase a CD at for $1,000 at 5% for 1 year. Does that mean I get 5% per month, or just 5% for the whole year?
50 bucks a month or 50 bucks a year?
2015-08-11 03:33:41 · answer #2 · answered by Anonymous · 0⤊ 0⤋
This depends upon whether or not the interest is compounded. If it is compound interest, it will be figured monthly, if not then you get your percentage for the year. To find out which, go to the bank where you have the CD, and ask. Most banks will have their interest rates posted. If there is a monthly compound the rates listed will be in two figures, the monthly compound, and the final payoff percentage. As the rates change on a weekly basis, if you have already bought a CD, then your best bet is to inquire what the percentage was at the time of purchase.
2007-02-03 01:06:32 · answer #3 · answered by Beau R 7 · 1⤊ 1⤋
It depends on how the interest is compounded. If it's annual, you would receive $50 in interest. Quarterly or monthly compounding (more common) would give you slightly more because you earn interest on each prior period's interest as well.
2007-02-03 02:30:24 · answer #4 · answered by SDD 7 · 0⤊ 1⤋
David Parker and Nick Roberts posted the same question. You should see their answers side by side.
2016-08-23 16:59:41 · answer #5 · answered by Anonymous · 0⤊ 0⤋
$50/year
2007-02-03 01:07:00 · answer #6 · answered by Joseph's Mama 4 · 1⤊ 0⤋