A banking/interest rate question

[Karen G]

For the bankers and financial wizards out there, can someone explain to me how interest is figured on a CD? The interest rate is 4.98% and the term is 8 months. Interest has been paid for three months, but it's different every time.

Here is the record:
Date Description Amount
12/28/06 INTEREST PAYMENT +$136.48
11/28/06 INTEREST PAYMENT +$140.43
10/27/06 INTEREST PAYMENT +$135.34
09/28/06 OPENING CERTIFICATE DEPOSIT +$33,000.00

It seems to me that the interest amount paid should be the same each month or even get larger since the interest stays in the account. But, as you can see, the interest payment increased in November, but went down in December.

Thanks in advance for any help.

 

[Makai Guy]

Different number of days in each period.

 

[johnmfaeth]

And a very slight compounded interest "effect" as the CD's life progressed.

(in case you want to calculate to the penny).

 

[Banker]

Yes, September had 30 days, October 31 , November had 30 and December 31., just like Makai Guy says...but they also could either pay simple interest or compounded interest. ..and if they compound, do they do it daily, monthly, quarterly or annually? And if the customer really wants it , even if they pay simple interest , they could give it to you monthly...which do they do?

 

[djs]

Your first interest payment would have been based on a balance of $33,000; the second on a balance of $33,135.34; the next one on a balance of $33,275.77 and so on. Basically, your balance goes up each month by the previous month's interest and then interest is paid based on that new amount each month.