If I open up a CD or savings account that builds interest at a rate of 5% how does that work?

After three months the 5 % kicks in. If I start a CD or savings account of 5,000 and have a 5% interest rate, how much will have have at the end of 12 months? Serious inquiries please, I'm investment challenged here!

If you open CD account with 5,000 and 5% annual interest rate you will have 5,250 after 12 months or 250 more.
You may consider investing in good mutual fund like OBCHX for example with last 12 mo return around 78% -that would turn your 5,000 to 8,900 or 3,900 more.
But beware!!!
Past performance does not garantee future results.
There have risk involved !
Good luck !!!

Do you mean that you do not earn any interest for the 1st 3 months? That is not the normal way a cd works. Normally they pay interest from day of deposit until the day they come due. The amount you would earn is $250 for one year before taxes.

The interest you will get after a year will be
5000 x 5/100 = 250 ( Note how easy it is to work out)

The kick in period will make no difference if you leave the money in for more than three months.

You need about 5000 (拢 or $) quickly available for emergencies.
Only consider mutual funds with the next 5000 and shares with the 5000 above that.
Investing is not about getting rich quickly. Gambling is.

It does not work. 5% less 25% (could be more) taxes is 3.75% which is less than true rate of inflation though CPI around 2.8% Have to get out of banks & invest. $5000 too much to waste in a guranteed loser of purchasing power. You only get $250/yr which is nothing. Fell free to e-mail for more options vegas_iwish@yahoo.com. Investing does not mean can lose it all....

Join my small business group! I believe you will earn up to $250.00 dollars a year when you don't move your money! I can write a page about this. Contact me.

The 5% rate is the "stated rate". The APY (annual percentage yield) is more telling regarding what you will have at the end of 1 year. The more frequently the invested amount is compounded, the higher the APY. The calculation would go something like this---if componded quarterly, at the end of 3 months you would have $5062.50. At the end of 6 months you would have ($5062.50 *.05/4) additional interest for a balance of $5125.78. At the end of 9 months you have have ($5125.78*.05/4) additional interest for a balance of $5,189.85. At the end of a year you would have (5,189.85 *.05/4) additional interest for a balance of $5,254.72--slightly more than if it were compounded yearly--$5,250.00.
If it were compounded monthly, the yield you be greater than $5,254.72 but less than it would be if compounded daily.
All of these calculations assume that the original $5,000 investment is left intact during the year.