How do I Calculate a 20-Year Certificate of Deposit?

Certificates of deposit are nice because you earn a better interest rate than with regular savings accounts and most money market accounts. Even better, that rate is guaranteed for a stated period called the maturity. Most CDs mature in five years or less, but some have maturities up to 20 years. In most cases, the interest rate is fixed, although you will find some 20-year CDs with a guaranteed minimum rate that is variable. If the rate is fixed, you can calculate the value of the CD at any point in time up to the 20-year maturity date.

Divide the annual interest rate by the number of times interest is compounded (calculated) each year to find the periodic interest rate. You can locate the annual interest rate and compounding interval in the terms and conditions of the CD. For example, many CDs are compounded monthly, so divide the annual rate by 12 to find the periodic interest rate.

Convert the monthly periodic rate to decimal form by dividing it by 100. For example, with a monthly periodic rate of 0.40 percent, you have 0.4 percent divided by 100, which is equal to 0.004.

Add the monthly periodic rate to 1.0 and raise the result to a power (exponent) of 12 to find the annual compounded interest rate. When you raise a quantity to a power, it means you multiply the number by itself the number indicated by the exponent. For instance, with a monthly periodic rate of 0.004 you have (1.0 + 0.004)^12 = 1.0490697 (the “^” means the next number is the exponent). This is the annual compounded interest rate (0.0490697) plus 1.0.

Raise the annual compounded interest rate plus 1.0 to the 20th power. Continuing the example from Step 3 you would have (1.0 + 0.0490697)^20, which works out to 2.6066736. This is the ratio of the original principal amount of the CD to its value after 20 years.

Multiply the original amount of the CD by the ratio of the original amount to the original value after 20 years to calculate the future value of the 20-year CD. Continuing the example from Step 4, if you started with a $10,000 CD, the value after 20 years is given by 2.6066736 multiplied by $10,000, which is equal to $26,066.74.


  • The steps required to calculate a 20-year CD are summarized with the formula V = P(1 + R/C)^RY. P is the principal, R is the annual interest rate, and C is the number of times per year interest is compounded. Y is the number of years. V is the value of the CD. You can input this formula into a programmable calculator if you wish.

About the Author

Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.