How to calculate certificate of deposit

how to calculate certificate of deposit

By: Staff

By Philip Van Doorn

Many investors are focused on the day-to-day performance of the stock market, and while this is certainly where the excitement is, you should also pay attention to the cash in your portfolio.

Most investors keep cash in a sweep account, which is where dividends and proceeds from trades are placed by the broker until they are reinvested. But this is probably not the best option for all your cash. The yields may be next to nothing, and even now that the Federal Reserve is cutting short-term interest rates, there are other places to park your cash that measure up well against the yields on investment-grade bonds, with much less risk.

Typically, when the Fed cuts rates, as it has three times since September, interest rates on bank deposits and other short-term investments move down in lock step. But many banks are holding rates steady or even boosting them to compete for deposits because it has become so difficult to raise money in the capital markets.


of Deposit

If you are willing to commit some cash for a while, your broker can probably help you to find a bank certificate of deposit with a yield that stacks up reasonably well in this market, especially when you consider that it is FDIC insured. That's particularly true of some banks exposed to the subprime mortgage crisis that have had to write down the value of assets and are looking to boost deposits and stabilize their liquidity.

Countrywide Financial (CFC) is offering 5.45% on three-month CDs and 5.35% on six-month CDs, with a $10,000 minimum. E*Trade Bank, a unit of E*Trade Financial (ETFC). recently raised the yield on its six-month CD to a very competitive 5.25%, with a $1,000 minimum. The same rates with the same terms are available at Doral Bank, a unit of Doral Financial (DRL) .

The following table shows national composite CD rates for various terms. The table also shows the results of a CD rate search on Dec. 10, within two miles of's home zip code, 10005:


Category: Bank

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