Certificate of Deposits

Certificate of Deposits
Name
Institutional Affiliation
Certificate of Deposits
Opinion on Low CD Rates
Even though the certificate of deposit rates are currently at their historic low, I think people should not resort to keeping money under the mattress and in the piggy banks. First, the CD accounts guarantee safety of the money kept as opposed to these old methods (Law, 2018). Additionally, money deposited in the CD accounts earns some interest even if it is little.
Discussion Thread
Situation not long ago
Starting amount = 5000 dollars
Interest rate = 5.55% compounded daily
Time = 2 years
Calculating the ending balance
A = P (1+ r/n)ntWhere A= Ending balance
P= Initial deposit
r= Interest rate
n= number of times interest rate is calculated in a year
t= number of years for which the CD will be kept
Substituting:
A= 5000([1+0.055/365])(365×2)
A= 5000(1.000151) (730)
A= 5000(1.116526)
A= 5582.63 dollars
Therefore in two years, I will have 5582.63 dollars in my CD account
Calculating the Interest earned in the two years
Interest= A- P
Substituting:
Interest= 5582.63- 5000
Interest = 582.63 dollars
Therefore the interest earned from the deposit in the two year span is 582.63 dollars.
Current Situation
Currently, Capital One 360 is offering a CD rate of 3.00% compounded monthly. With my 5000 dollars deposit how much will I have after two years?
Calculating the ending balance after 2 years:
A = P (1+ r/n)nt  
Substituting:
A= 5000 ([1+ 0.

03/12]) (12×2)
A= 5000 (1.0025) (24)
A= 5000 (1.06175704)
A= 5308.785
Therefore with the current rates, I would have saved 5308.785 dollars in the account.
The change in rates resulted in a reduction in the amount I saved which lowered my purchasing power.

Reference
Law, J. (2018). A Dictionary of Finance and Banking. Oxford University Press.