Understanding Certificates of Deposit (CDs)

The video tutorial explains how to calculate interest earned on certificates of deposit (CDs) using the annual percentage yield (APY). It provides step-by-step examples for different CD amounts and durations, emphasizing the importance of understanding APY and its role in determining interest at maturity. The tutorial encourages active learning by prompting viewers to pause and attempt calculations themselves.

What does APY stand for?

• Annual Percentage Yield

• Annual Profit Yield

• Annual Percentage Year

• Annual Payment Yield

What is the first step in determining the interest earned on a $10,000 one-year CD?

• Find the APR

• Find the APY

• Calculate the maturity value

• Determine the compounding frequency

How much interest does a $10,000 one-year CD earn at an APY of 3.40%?

• $34

• $3400

• $340

• $3.40

What is the APY for a $250,000 one-year CD?

• 3.50%

• 3.60%

• 3.40%

• 3.35%

What does 'maturity' mean in the context of a CD?

• The middle of the investment period

• The interest rate

• The end of the investment period

• The start of the investment

What is the APY for a $5,000 two-year CD?

• 3.85%

• 3.90%

• 3.60%

• 3.40%

How much interest does a $70,000 two-year CD earn at an APY of 3.90%?

• $5,566.47

• $3,900

• $5,000

• $7,000