Calculate dialy compounded CD check my math?

[kremonis]

I stumbled upon an unique to me CD:

3-12 months

.19% APY

Interest compounded daily

required monthly deposit into CD

For example

principal : $1000

term: 3 months

required monthly deposit: $50

(I used this calculator https://www.thecalculatorsite.com/finance/calculators/daily-compound-interest.php)

I got a total earnings $204.38

For 12 months I got $1,262.25 total earnings.

Is math correct?

[ptatohed]

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@kremonis wrote:

I stumbled upon an unique to me CD:

3-12 months

.19% APY

Interest compounded daily

required monthly deposit into CD

For example

principal : $1000

term: 3 months

required monthly deposit: $50

(I used this calculator https://www.thecalculatorsite.com/finance/calculators/daily-compound-interest.php)

I got a total earnings $204.38

For 12 months I got $1,262.25 total earnings.

Is math correct?

---

Why is a 0.19% APY unique??  In all honesty, it sounds terrible.  I have CDs in the 4% and 5%s.  Even just HYSAs are in the 5%s currently.  I bought my 4.X% CDs before rates were in the 5%s and I am kicking myself now that my money is tied up.  What do you mean by monthly deposit?  Is it an Add-On  CD?  Those exist but are not typical.  

And, no, $1000 at 0.19% (even with $50 monthly add-ons) is not going to give you over $200 (assuming you are talking a 12 month term? - or are you saying 3 months????).  That would be a 20%+ return!  (80% return if you are talking 3 months)  Really, you'd be looking at less than $30 for the year.  

My advice?  Take your $1000 and buy a high 4% or low 5% CD, or just plunk it in a 5%+ HYSA.  You'll have $50 at the end of the year.  

[FicoMike0]

I agree with @ptatohed . That calculator is a little wack. When you select daily compounding, it calculates actual daily interest. To get the correct answer from it, you first have to divide the apy by 365 to get daily interest. If you try it with 0.19%/365=0.00052% you'll get the correct answer. $1000 @0.19% for a year is $1.90 interest. With such a low interest rate, daily compounding doesn't even add one cent to the result vs. simple yearly interest without compounding.

[ptatohed]

Actually, the frequency of compounding - daily, monthly, yearly or none at all is irrelevant when you are provided the APY (Annual Percentage Yield).  The APY is the APR (Annual Percentage Rate) with the compounding already calculated in.  This is why you'll see "APR = 5.023%, APY = 5.15%".

In this example, if you put $1000 at APR 5.023% into a HYSA but had the daily or monthly interest paid to you instead of reinvested, you'd have earned exactly $50.23 at the end of the year (APR x initial deposit).  But, instead, if you reinvested that interest earned at the APR, you'll now earn interest on that earned interest (at the APR).  These little increases in interest earned along the way, over the year, will result in $51.50 earnings at the end of the year.  This works out to be an 'effective APR' (or APY) of 5.15%.    (this example uses daily compounding)

[FicoMike0]

@ptatohed  Great point! Apy does include the compounding. 

I remember a calculus problem, if you deposit $1 in an account that pays 100% annual interest, compounded continuously, how much would you have in one year? The answer is $2.71828... = e, Euler's number. 

[AndySoCal]

@kremonis 

Here is link to a credit union that I am a member of 

https://forteracu.com/rates 

The access certificate allows contributions during the term of the CD.  Membership is easy it may require a video call.

[ptatohed]

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@AndySoCal wrote:

@kremonis 

Here is link to a credit union that I am a member of 

https://forteracu.com/rates 

The access certificate allows contributions during the term of the CD.  Membership is easy it may require a video call.

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Good, but not great.  Their best APY is 12 months at 4.65% APY.  Else, 4.05%.  One can do better.  The fact that it is an add-on CD is unique but I don't see the add-on feature trumping a higher rate, IMHO.  

https://forteracu.com/banking/personal/savings/certificates/access-certificate

[AndySoCal]

@ptatohed  I agree. To some extent you need to know what the purpose the funds are being used for and when. Some financial institutions have decent CD recents but liquid savings accounts are  not competitive ie one or two percent. this type of account would like a pseudo  money market without the liquidity feature.   I can find credit unions  and banks that CD rates under one percent depending on the term.

[Kforce]

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@kremonis wrote:

I stumbled upon an unique to me CD:

3-12 months

.19% APY

Interest compounded daily

required monthly deposit into CD

For example

principal : $1000

term: 3 months

required monthly deposit: $50

(I used this calculator https://www.thecalculatorsite.com/finance/calculators/daily-compound-interest.php)

I got a total earnings $204.38

For 12 months I got $1,262.25 total earnings.

Is math correct?

---

Late to find this post.

"No", as others have posted.

A few problems.

Apr and Apy are different animals, an Apr of 19% (daily) would = 17.4 Apr

and and Apy of 0.19% (daily) would = 0.1898 Apr.

17+ % interest is extremely high and probably an error and not the rate.

~0.2% Apr is really, really low interest, and would be earning almost nothing.

Don't know what the 0.19 is in your post but probably not the rate

0.2% for a year would be  ~ $2.40 gain

17.4% would be ~$235 for a 1 year.

3 months of $204 or $1,262 a year is bad math  

If you were to put 1000+ full years deposit's in at the start = $1600,

@17.4%, and money compounded daily = $304 interest.

With 0.19 APR = 1 year is only $3.04

As also recommended by @ptatohed and others, a good HYS

where extra money to be added anytime and can have a rate very

similar or better.