APY?? How much is it worth?

Question

I want to open cd with 5000 for 5 years at 3.30 apy how much will I earn? And also are there any other saving account that might produce more money?

Answer 1

APY means "Annual Percentage Yield". So each year, you will earn 3.3 percent on your investment:

The first year, you would have your initial $5000 plus 3.3 percent of 5000.

The second year, you would have what you had at the end of the first year, plus 3.3 percent of that.

The third year, you'd have what you had at the end of the second year, plus 3.3 percent of that

And so forth.

3.3 is not a bad rate for a CD, but it's not a tremendously good one, either. Usually the longer you leave your money in the CD, the better your interest rate will be. I know you could do a little better at ING Direct, which is currently paying 4.0 percent APY on 60-month certificates. Other online banks may offer similar rates.