What is the difference between the dividend rates and APY for a certificate of deposit? - certificate of deposit rates
I have trouble understanding what types of CDs on my banking site.
For 1-year CDs have the following types of publications:
Dividend: 5.40%
Monthly APY: 5.54%
Quarterly APY: 5.51%
What is the difference between these guys? To calculate simple that I had invested $ 100 into this CD. What interests you earn that $ 100 in 1 month, 3 months and 1 year? And what formula is used to achieve these numbers?
Friday, January 29, 2010
Certificate Of Deposit Rates What Is The Difference Between The Dividend Rates And APY For A Certificate Of Deposit?
2 comments:
The dividend rates are set by the board of directors and is subject to change to the current economic conditions and the annual profits of the company.
(APY) Annual rate of return assumes reinvestment of dividends and capital. APY is calculated compound interest is added to the original capital. This new interest is added to be calculated not only to the principal, but also in interest. The more often interest is compounded, the faster the principal grows. The annual compound interest is regarded as standard, unless otherwise indicated.
A CD in the world of personal finance is not a CD, but a certificate of deposit. You buy a CD from a bank or savings and loan for a certain amount of money and the bank agrees to pay a fixed rate of interest on the money with a firm. For example, you can buy a CD with 30 months to 3% of the amount of $ 5,000 to pay. A bank can have a minimum amount for the issuance of CDs, the $ 1000 buy, but generally no obligation to provide a CD with a single step. InterestArnett CD can be paid monthly, quarterly, annually, or when the CD matures. Interest will be paid during the term of the CD by check or by deposit to another account, he never has the level of the CD (like a savings account) because it establishes the amount of CDs.
After purchasing a CD, you can redeem at any time before the expiration date. However, if the cash ahead of time, says the bank a penalty of $ 3 or 6 months of interest, as the concept. This "early withdrawal penalty is payable if the interest is paid or not.
As the name implies, is a CD is usually a piece of paper certifying (certificate) that the interest rate and term () is indeed the end of the period of validity. Since the CDs were issued by banks, which have a CD for less than $ 100,000 is from the government (probably the program, the FDIC) insured, so that the investment is essentially risk-free.
Some CDs can be bought and sold like a stock or bond. If you buy a CD in a brokerage, you may be a CD via a sale to avoid the paymentearly withdrawal penalty. These CDs tend to have large minimum investment amounts (like $ 5000) and require round numbers (such as a multiple of 1000).
The dividend is paid, the actual CDs, if you're interested, take a month, you make 5.4%. Annual Percentage Yield is calculated by the interest and reinvestment. So if you're interested in and relaxed, you make more money. We have a CD that can be in one room it matures APY of 5.51%, but earn only one quarter of it back because it is invested for the entire year. Conversely, if you are at the same rate in each quarter could be renewed and are not interested, then you will receive the APY of 5.51%.
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