when are dividends paid to the CD account. Is the return of the CD better if monthly or at maturity? These are the 2 choices I have

1 Answer 1


If they are the same annual rate, it's marginally better if is compounds monthly. Over one year, a 2% CD that compounds monthly will yield 102.02, while one that compounds annually will yield only 102.00. At 5%, the difference would be 105.12 versus 105.00. So the difference is negligible for low rates (which CDs typically pay now). It only makes a meaningful difference over very long periods of time or for very high rates.

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