PenFed CD question - compounded daily vs. simple interest

[Carpediem]

A CD newbie question ..... The following is from the PenFed website:

"6 Month certificates earn dividends on simple interest basis. All other certificate dividends are compounded daily."

I was going to invest in a 6 month CD (2.2% at PenFed) when I noticed the fine print above. I'm definitely a member of the 'math is hard' crowd so I was wondering if this should cause me to look around. Or is that fairly common (i.e., simple interest) for 6 month CDs?

 

[Henry Lili]

Pretty sure it means you don't get interest on your interest. Just on your initial deposit

 

[pb4uski]

A CD newbie question ..... The following is from the PenFed website:

"6 Month certificates earn dividends on simple interest basis. All other certificate dividends are compounded daily."

I was going to invest in a 6 month CD (2.2% at PenFed) when I noticed the fine print above. I'm definitely a member of the 'math is hard' crowd so I was wondering if this should cause me to look around. Or is that fairly common (i.e., simple interest) for 6 month CDs?

It doesn't matter.... on $1,000 the difference is 6 cents.... $1,011.06 vs $1,011.00.

» Certificate of deposit calculator

 

[kaneohe]

Isn't the bottom line result reflected by the APY (not APR). I noticed that the 6mo CD is the only one with APR=APY. The others have APY a bit higher than APR. https://www.penfed.org/accounts/money-market-certificate

 

[jazz4cash]

Isn't the bottom line result reflected by the APY (not APR). I noticed that the 6mo CD is the only one with APR=APY. The others have APY a bit higher than APR. https://www.penfed.org/accounts/money-market-certificate

That’s the way I look at it. When comparing rates use APY, not APR.

 

[pb4uski]

Isn't the bottom line result reflected by the APY (not APR). I noticed that the 6mo CD is the only one with APR=APY. The others have APY a bit higher than APR. https://www.penfed.org/accounts/money-market-certificate

Yes, APY reflects the impact of the compounding frequency on the annual yield.

Using the same calculator the APY of the 6 month compound CD is 2.212% and for the daily compounded CD is 2.224%.

 

[Carpediem]

It doesn't matter.... on $1,000 the difference is 6 cents.... $1,011.06 vs $1,011.00.

» Certificate of deposit calculator

Thank you! Very helpful.