Effective Interest Rate

[raytehawsome]

Hi there,

I am wondering if someone can help me figure out how to format this formula. Let's say I open up a CD for 5 years (60 months). If I keep the money in there for at least 4 months without breaking it I will get a $1000 bonus and the APY is 3%. How do I calculate the effective annual interest rate for the first year for this so that it includes the one time bonus I will get? For argument's sake, let's say that I put $100,000 into the CD. Thank you in advance for helping!

 

[shg]

In a year, you earn $4K on $100K, so the effective rate is 4% for the year. 2.5% for the first six months.

 

[jtakw]

Hi,

It would also depend on whether the $1000 bonus given after 4 months (not 6 months) also earns interest for the rest of the year...

 

[raytehawsome]

Sorry, rather how would I write the formula to figure that out? And while I threw out some numbers there as an example, I am looking to sub in those numbers with different dollar amounts represented by different cells. Also, thank you for the clarification jtakw, I will not be earning interest in the $1000.