Understanding your calculation
Method, example and limitations
How the calculation works
A certificate of deposit grows an initial balance at the selected rate and compounding frequency. Without tax, periodic compounding uses A = P(1 + r/n)^(nt); continuous compounding uses A = Pe^(rt). Annual mode treats the entered percentage as the annual yield. The tax setting reduces each simulated monthly interest credit, which is a simplified tax treatment.
Example to check
With a deposit of $10,000, a 5% annual yield, three years and no tax, the ending balance is $10,000 × 1.05³ = $11,576.25. The $1,576.25 difference is interest, not an additional deposit. Switch to the monthly schedule to inspect the accumulation.
Before using the result
A quoted APR and APY are different: select the matching frequency before comparing bank offers. This tool does not model early-withdrawal penalties, changing rates, bank-specific day counts or deposit-insurance eligibility. Its monthly tax deduction is not a tax-return calculation.
CFPB: How compound interest works · Calculation methodology · Report a result that needs review