About

When locking money away in a Term Deposit or Certificate of Deposit (CD), the advertised interest rate is only half the story. The true return depends on the compounding frequency how often your interest earns interest and the tax obligations on your earnings.

This calculator provides a transparent side-by-side comparison of "Simple Interest" (paid at maturity) versus "Compound Interest" (reinvested periodically). It is specifically designed to help investors decide between shorter terms with frequent compounding or longer terms with higher flat rates.

Formulas

The tool uses two distinct formulas to project your returns:

1. Simple Interest:
A = P × (1 + rt)

2. Compound Interest (APY):
A = P × (1 + rn)^nt

Where P is Principal, r is the annual rate (decimal), n is compounding frequency per year, and t is time in years.

Reference Data

Compounding Frequency	Nominal Rate	Effective APY	Earnings on $10,000 (1 Year)
Simple (At Maturity)	5.00%	5.00%	$500.00
Semi-Annually	5.00%	5.06%	$506.25
Quarterly	5.00%	5.09%	$509.45
Monthly	5.00%	5.12%	$511.62
Daily	5.00%	5.13%	$512.67

Frequently Asked Questions

Simple interest is calculated only on your initial deposit. Compound interest is calculated on your deposit plus any interest you've already earned. For terms longer than one year, compound interest significantly outperforms simple interest.

Banks use different conventions to calculate daily interest. 'Actual/365' is the standard for most consumer accounts, paying interest for every day of the year. '30/360' is an older commercial standard that assumes every month has 30 days. The 365-day basis usually yields slightly more for the depositor.

APY (Annual Percentage Yield) is a pre-tax figure. If your jurisdiction withholds tax (e.g., 15% or 30%) on interest income, your 'Net Yield' will be lower. This calculator subtracts the tax from the interest portion to show what effectively hits your pocket.