How To Read a Bank Term Saving Certificate Rate Sheet

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I was told that a man went into the bank and bought a 1 year Certificate of Deposit (CD) for $1,000.00 and would get $600 dollars at the end of the 1 year contract. It took me a nanosecond to realize that would be a 60% return on investment (ROI). I was ready to run to the bank and sign up for one of those. I went to the website of the bank and pulled up their CD rates. Here is what I got:

Investing $1,000.00-$9,999.99

Term               Dividend Rate    APY*

3-5 Months       0.30%               0.30%

6-11 Months      0.60%               0.60%

12-17 Months    0.90%               0.90%

18-23 Months   0.90%               0.90%

24-35 Months   1.09%                1.10%

I realized he was reading the chart incorrectly. The rate you are looking at says 3-5 months at 0.30%. In plain english this means you are getting 3% or $30.00 dollars in interest.

The second line says 6-11 months at a rate of 0.60%. In English this means you are getting 6% or $60.00 dollars interest.

I than saw how easy it is to assume that you are getting 60% the Annual Percentage Yield (APY) for the 12-17 months investment.

Here is how it really works: 0.30% means 3% (multiply 0.03 x 10 = 3). You will get $30.00 for your $1,000 investment. After one year.

Think of it this another way:

10% 0f 1,000 dollars is $100 dollars

20% 0f 1,000 dollars is $200 dollars

30% 0f 1,000 dollars is $300 dollars

40% 0f 1,000 dollars is $400 dollars…

Thus 3% of $1,000 = $30.00; 6% of $1,000 = $60.00

Now go to your bank and see what their rates are for investing $1,000 for 12 months and see what they tell you. If you are getting anything more than 3-6%%, let me know that bank. I want going over there and invest in a one year CD.

Until tomorrow! Bless Kobe Bryant and the families who lost their love one in the helicopter crash yesterday. Pray for them!

R.LaMont W.

Robert L Woods

Robert L Woods

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About Me

Robert L. Woods is the retired partner of the Institute For Fiduciary Education ( that provided investment seminars for public and private pension funds, endowments and institutional fund managers. He spent 28 years working for the State of California, as a budget and financial analyst which includes 16 years as an Investment Officer for the California State Teachers’ Retirement System (CalSTRS). At CalSTRS, he established it as one of the nation’s first institutional home loan programs with a down payment assistance component. He also spent 13 years on the Board of Trustees for the Sacramento County Employees Retirement System (SCERS). He was a Trustee with the University of California, Davis, Cal Aggie Alumni Association and a member of the Chancellor’s Council on Community & Diversity. He is a Life Member: Phi Beta Sigma Fraternity, Inc., Theta Gamma Sigma Chapter, Sacramento, CA.

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