This is an accounting/banking/interest rate question: if someone puts in, say, $20,000 in a CD with an APY of

3.5%, how much will that investment be worth in a year? That is, how much interest would it have made? Also, In CDs, is interest accrued daily, monthly, quarterly, or yearly?

P.S- dont only give the answer, but also explain how you came about it. Thanks

$840 approximately. cds accrue based on the term of the cd. if you have it in a year-long cd then you will make 3.5% of $20,000 every month.

If you have $20,000 in a cd for 1 year at 3.5% APY you made $700.

I you would like to learn how to earn a much higher percentage on your money this site will help to educate you.

APY (Annual percentage yield) is the affective interest rate. That is, it is the interest rate with its compounding. The rate is, therefore always going to be lower than the APY

CD compound daily using a 360 day year. (360 is used because it can be divided by 12 months easily). The answer is 20,000*.035=700 in interest plus the original 20,000 for a total of 20,700.

You did not ask but the rate required to give an APY of 3.5% is 3.4403% compounded daily.

The formula is 20000*((1+(0.034403/360))^360)

You will make $700 over the course of the year total. When looking at CD's, always look at APY. It is the most important number. For example, let say you have 2 cd's that both pay 3.5% but one of them compounds monthly and the other compounds semi-annually. The one that pays it's interest monthly will give you more money in the long term. That is because the interest you make in the first month will earn interest for the next 11 months. Then, the interest you earn in the second month will be paid to you and you will earn interest on it for the next 10 months, etc. Therefore, you got to use your interest that you earned to earn more interest. This is called compounding. The government makes all banks quote their CD's as APR and APY. APY gives you your yield after all of the compounding is taken into consideration. That way you are comparing apples to apples. The APY is actually what you make. Your CD that has a 3.5% APY probably has a slightly lower rate, but after compounding, you actually earn 3.5%. Hope this helps.