How to Calculate the Maturity Value of a Time Deposit

by Mark Kennan

Time deposits refer to accounts that you put money in for a specified period of time to accrue interest at a specified rate until they mature, such as certificates of deposit. Usually, you cannot remove money from the time deposit before the maturity date without paying an early withdrawal penalty. In exchange for this illiquidity, time deposits often offer a higher interest rate. Calculating the maturity value of a time deposit helps you know how much you will have when you can remove the money from the account.

Divide the annual interest rate on the time deposit by the number of times interest compounds each year to find the periodic rate on the time deposit. For example, if you have a time deposit that compounds interest quarterly and an annual rate of 6.2 percent, divide 0.062 by 4 to find the periodic rate on the time deposit equals 0.0155.

Add 1 to the periodic rate on the time deposit. In this example, add 1 to 0.0155 to get 1.0155.

Multiply the number of compounding periods per year for your time deposit by the number of years in the term of the time deposit to find the number of compounding periods before the time deposit matures. For this example, if the time deposit matures in five years, multiply 5 by 4 to get 20.

Raise the Step 2 result to the number of compounding periods in the time deposit. In this example, raise 1.0155 to the 20th power to get 1.360186797.

Multiply the result by the initial balance of the time deposit to find the maturity value of the time deposit. Completing the example, if your time deposit started with $8,300, multiply $8,300 by 1.360186797 to find the value at maturity equals $11,289.55.

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