How to use the cd ladder calculator
- List each CD in the ladder as a rung: its term in months, its APY and the amount you put in. A four rung ladder with equal amounts and terms of 12, 24, 36 and 48 months is loaded as an example.
- Add or remove rungs. The rates shown are examples, so replace them with the offers you have.
- Read the blended APY, the interest you earn by the time every rung matures, and the maturity schedule with the value of each rung.
- Use Copy, Print or CSV to keep the schedule.
Formula
Value at maturity = amount x (1 + APY)^(months / 12)
Interest = value at maturity - amount
Blended APY = sum of (amount x APY) / total invested
APY already includes compounding, so it works as a yearly growth factor. Blended APY is a weighted average, which is a handy summary but not a rate the whole ladder earns over any one period.
Four rungs of 5,000 dollars
Put $5,000 into each of four CDs paying 4.0% for 12 months, 4.2% for 24 months, 4.4% for 36 months and 4.6% for 48 months. The values at maturity are $5,200.00, $5,428.82, $5,689.47 and $5,985.45.
The total invested is $20,000 and the interest earned when every rung has matured is $2,303.74. The blended APY is the average of 4.0, 4.2, 4.4 and 4.6, which is 4.3%. One rung comes due each year, so you get access to a quarter of the money annually.
What a ladder is for
A CD ladder splits money across CDs that mature at different times. Because longer terms often pay more, you can earn a higher yield on part of the money while still having a rung come due on a regular schedule. When a rung matures you can spend it or reinvest it at the then current rate, usually at the long end of the ladder.
The blended APY shows the average yield across the rungs. Compare it with a single CD of the same total to see what the ladder costs or gains. You can also compare against a savings account, which has no fixed term.
What this tool does not cover
Banks can charge a penalty for taking money out before a rung matures, and the penalty rules differ. Interest may be taxable. Neither is modeled here. The calculation also holds each rung once, so it does not show what happens when a rung is rolled into a new CD.
For a single CD with an early withdrawal penalty, use the CD calculator, and to convert between a rate and a yield, the APY and APR calculator. To see how a lump sum grows with deposits, try the compound interest calculator.
Assumptions and limits
- The rates are APYs, and each CD is held to maturity once with no withdrawals and no additions.
- Terms are whole months. Interest is not paid out early or taxed in this calculation.
- Example amounts and rates are starting points to replace. They are not current offers.
- Blended APY weights each rung by the amount invested.
Frequently asked questions
How is blended APY calculated?
Multiply each rung's amount by its APY, add the results, and divide by the total invested. It is a weighted average of the yields.
How many rungs should a ladder have?
It is your choice. More rungs spread maturities more evenly but mean smaller amounts per CD. This tool allows from 2 to 12 rungs.
Does a CD ladder earn more than one CD?
Not necessarily. It depends on the rates offered at each term. A ladder trades some yield for access to part of the money at regular dates.
Why are the rungs sorted by term?
The schedule is in order of maturity so you can see when money comes due, whatever order you typed the rungs in.