The formula to calculate the Return on CD (ROCD) is:
\[ ROCD = \frac{CV - PP}{PP} \times 100 \]
Where:
Return on CD (ROCD) is a measure of the profitability of an investment in a Certificate of Deposit (CD). It is calculated by subtracting the purchase price of the CD from its current value, dividing by the purchase price, and multiplying by 100 to express it as a percentage. This metric helps investors understand the return they are earning on their investment in CDs.
Let's assume the following values:
Step 1: Subtract the purchase price from the current value:
\[ 1050 - 1000 = 50 \]
Step 2: Divide by the purchase price:
\[ \frac{50}{1000} = 0.05 \]
Step 3: Multiply by 100 to express as a percentage:
\[ 0.05 \times 100 = 5\% \]
Therefore, the Return on CD is 5%.