1. What Is CD Yield?

CD Yield represents the return on investment for a Certificate of Deposit, calculated as the percentage gain from the purchase price to the face value at maturity.

2. How Does The Calculator Work?

The calculator uses the CD Yield formula:

Where:

• \( Face\ Value \) — The maturity value of the CD (USD)
• \( Purchase\ Price \) — The initial investment amount (USD)
• \( Yield \) — The percentage return on investment (%)

Explanation: This formula calculates the simple yield percentage by comparing the profit (face value minus purchase price) to the original investment.

3. Importance Of Yield Calculation

Details: Accurate yield calculation helps investors compare different CD offerings, assess investment performance, and make informed financial decisions about fixed-income investments.

4. Using The Calculator

Tips: Enter the face value and purchase price in USD. Ensure the purchase price is less than the face value for a positive yield. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What Is The Difference Between CD Yield And Interest Rate?
A: CD Yield represents the total return percentage, while interest rate is the annual percentage rate paid on the principal. Yield accounts for the total gain over the CD term.

Q2: What Are Typical CD Yield Ranges?
A: CD yields typically range from 1% to 5% depending on term length, current interest rates, and financial institution, with longer terms generally offering higher yields.

Q3: How Does CD Term Length Affect Yield?
A: Longer-term CDs usually offer higher yields to compensate for reduced liquidity and inflation risk over time.

Q4: Are CD Yields Guaranteed?
A: Yes, CD yields are typically fixed and guaranteed for the term, making them low-risk investments compared to stocks or bonds.

Q5: What Happens If I Withdraw Early?
A: Early withdrawal usually results in penalties that reduce your effective yield, often calculated as a percentage of interest earned or principal.