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If a CD pays 5% for a 5 year term, is that the same as saying it pays 1% per year? Would it be better to buy a 1year CD that pays 3 % each year for 5 years?
1 Answer
- zman492Lv 71 decade agoFavorite Answer
<<<If a CD pays 5% for a 5 year term, is that the same as saying it pays 1% per year?>>>
If taken literally, paying 5% for a 5 year term is the same as saying 1% per year with no compounding. However, I am pretty sure it really pays a APR (annual percentage rate) of 5% for a 5 year term, which is 27.6% for a 5 year term.
<<< Would it be better to buy a 1year CD that pays 3 % each year for 5 years?>>>
That would pay 15.9% for a 5 year term, which is better than 5% for a 5 year term but not as good as 27.6% for a 5 year term.
Source(s): Basic math
