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Bump-Up CD Help

Mathematically, the bump-up CD is modeled as two separate CDs; one using the original rate and the other using the bumped up rate.

Original Rate

  1. Present value equals original investment.
  2. Nominal rate equals original rate.
  3. Time equals time for which original rate was applied (i.e., the time before the rate was bumped up).
  4. Future value equals the value of the CD at the time the rate was bumped up.

Bumped Up Rate

  1. Present value equals the value of the original CD at the time the rate was bumped up.
  2. Nominal rate equals the bumped up rate.
  3. Time equals the time remaining based on the original term of the CD.
  4. Future value equals the future value at the end of the remaining time.

As always, the total interest is the difference between what the customer put into the investment and what the customer got out.