Quick question about CD APYs

[gamepad]

http://www.virtualbank.com/Banking/CDs.aspx

Why does 3.77% APY mean on a 3 month CD? Is that the APY if you invested in that CD 4 times to complete a year? And why is the APY higher for the 3 month one than the 5 year one?

 

[IronWing]

If the terms of the three month were in effect for a year then the yield would be 3.77%.

The three month CD carries a higher yield than the 5-year because the banks are uncertain about the direction of long term rates and don't want to get stuck paying what might, in retrospect, be a high rate for 5 years.

 

[gamepad]

Ah, thanks for the reply.