How to Calculate Accrued Interest on a Quarterly Compounding CD

Certificates of deposit help your savings keep pace with inflation.
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Certificates of deposit usually attract interest rates higher than those on savings accounts. Longer-term deposits attract even higher rates, as do deposits of higher amounts. In a compounding CD, interest on the certificate adds to the deposit, and you thereafter receive interest on that interest as well as the deposit's original principal. A CD that pays quarterly pays interest four times a year at a rate proportionately less than the annual interest rate.

Step 1

Multiply the number of years until the deposit matures by 4. For example, if you have invested in a five-year CD, multiply 5 by 4 to get 20, the number of quarters until the CD matures.

Step 2

Divide the CD's annual interest rate by 400. For example, if the deposit offers 4.2 percent interest annually, divide 4.2 by 400 to get 0.0105.

Step 3

Add 1 to the result, to get 1.0105.

Step 4

Raise this sum to the power of the number of quarters until the CD matures. Continuing the example, raise 1.0105 to the power of 20 to get 1.2323.

Step 5

Subtract 1 from the result, to get 0.2323.

Step 6

Multiply this factor by the deposit's principal. For example, if you put $10,000 into the deposit, multiply 0.2323 by $10,000 to get $2,323. This is the CD's accrued interest at maturity.

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