Instructions

• 1). Know the formula. The general formula for calculating interest is I = P*R*T.
  
  
• 2). Know what the formula means: I stands for interest, which is equal to the principal amount (P) placed in the CD multiplied by the interest rate (R) multiplied by the amount of time (T) that the money is to be in the CD accruing the interest.
  
  
• 3). Apply your own numbers to the formula. In this case, all that is known for sure is the length of time which is 5 years. I = P*R*(5).
  
  
• 4). Calculate the interest. Setting the principal amount at $10,000 and the rate at around 2.420% which is the highest rate for a CD at the moment, the interest can now be calculated. The rate is divided by 100 for the formula.
  
  I = ($10,000)(.0242)(5)
  
  The interest of a 5-year CD with a principal amount of $10,000 and a interest rate of 2.42% would be $1,210.