So, a question about 3 month CD's...?

Question

If the rate is listed as 3%, does that mean that it is 3% simple interest in three months, or is that based on a year (i.e. in three months, when the time is over, it will really be only 3/4% and I'd have to keep reinvesting it four times to get the 3%...?)

Or can I reinvest it 4 times and actually make 12% simple interest on it (which sounds too good to be true...)

Thanks! Policy eh? Devil's in the fine print I bet...!

Answer 1

If you can afford to "lock up" your money for a longer period, do a longer term CD.  The rates increase as your time commitment increases.

Answer 2

3% is the annual rate.

The 3 month rate would be .75%

Answer 3

It depends on the company and the offering, but as a general rule the 3% is the Annual percentage yield.  So you actually get .75% over 3 months or .25% a month but that doesnt sound as good.

But that probably doesnt even keep up with inflation which is topping 3% a year easy right now.