Two Ways to Measure a CD's Return
"Return" on a CD gets quoted two ways, and this calculator handles both. The annualized rate of return answers "what rate did my money actually earn per year?" — useful when you know what you put in and what came out. The projected ending value answers "what will this rate turn my deposit into?" — useful when you're evaluating an offer. Flip between them with the selector above.
The Rate of Return Formula
Annualized Return = (Ending Value ÷ Deposit)1 ÷ years − 1. A CD that grew $10,000 into $12,462 over 5 years returned (1.2462)^0.2 − 1 ≈ 4.50% per year — exactly the APY it was sold at, which is the point: for a CD held to maturity with interest compounding inside, your realized annualized return equals the APY. The formula becomes genuinely useful when things weren't so clean — early withdrawals, payout CDs, or comparing an old CD's actual performance against today's offers on our CD rate calculator.
Total Return vs Annualized Return
Total return is the full percentage gain over the whole holding period ($10,000 → $12,462 is a 24.62% total return). It looks impressive but can't be compared across different time spans — a 24% total return over 5 years is good; over 15 years it's poor. Annualized return puts everything on a per-year basis, which is why it's the number to use when comparing CDs against each other, against T-bills, or against any other investment.
What Reduces Your Realized Return
- Early withdrawal penalties — breaking a CD can cut your realized return well below the advertised APY. Check the damage with our penalty calculator.
- Taking interest as income — monthly payouts don't compound, so realized return lands slightly under APY.
- Taxes — CD interest is ordinary income; a 4.5% APY is roughly 3.5% after tax in a 22% bracket.