A fixed deposit (FD) is a financial product that is widely available from banks and non-banking financial companies (NBFCs). Fixed deposits are available in varying tenures and a predetermined rate of interest for each tenure, which is constant regardless of market volatility. You can invest for a period of seven days to 10 years. The higher the interest rate and interest collected owing to the power of compounding, the greater will be the returns on the deposit amount over a longer period.
Fixed deposit calculator
A fixed deposit calculator assists an investor in estimating the FD’s maturity amount for a specific term. Before investing, you can estimate the interest income using an FD calculator. The investment amount, current interest rate and tenure are all inputs into the FD calculator. As an output, it offers an estimate of the wealth earned and maturity amount.
Also read all about Post Office Fixed Deposit
Why use an FD calculator?
Investing in any plan should only be done after careful consideration and investigation. The investment strategy must meet your investment objectives. You must use a calculator to determine whether the investment program meets your objectives. This way, you will make an informed selection and avoid disappointments and surprises.
Fixed deposit calculation formula
The interest rate given by the bank for the fixed deposit is predetermined while investing. Furthermore, it remains consistent throughout the investment. The following are some of the elements that influence FD interest calculator:
- The duration of the investment is a component that influences the interest rate; the longer an investor stays invested, the greater the interest earned.
- A senior citizen’s interest rate is higher, ranging from 0.25% to 0.75% higher than the standard rate of interest. This extra interest is referred to as a preferred interest rate. The age at which a person is designated a senior citizen varies from bank to bank. A few consider 60 years, while others consider 55 years or less.
- The current economic situation is also a direct determinant. To determine interest rates, financial institutions and banks evaluate economic conditions such as the repo rate and the inflation rate.
- Finally, there are two ways to calculate the fixed deposit interest: simple interest and compound interest.
Calculation of simple interest on fixed deposit
Formula for simple intrest calculation
Simple interest = (P * R * T)/ 100
Where,
P = Principal amount invested
R = Rate of interest (%)
T = Tenure
Read more about Simple interest calculator
Calculation of compound interest on fixed deposit
Formula for compound interest calculation
A = P (1+r/n) ^ (n * t)
Where,
A = Maturity amount
P = Principal amount invested
r = Rate of interest (in decimals)
n = number of times the interest is compounded in a year
t = number of years
See also: All about CAGR calculator