Compound Interest Calculator SBI FD

Compound Interest Formula:

\[ A = P \times (1 + R / n)^{n \times T} \]

Principal Amount (P):

INR

Annual Interest Rate (R):

decimal

Compounding Frequency (n):

per year

Time Period (T):

years

Maturity Amount (A):

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1. What is the Compound Interest Formula?

The compound interest formula calculates the maturity amount for fixed deposits where interest is compounded periodically. It shows how your investment grows over time with the effect of compounding.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + R / n)^{n \times T} \]

Where:

\( P \) — Principal amount (INR)
\( R \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( T \) — Time period in years
\( A \) — Maturity amount (INR)

Explanation: The formula calculates how much your initial investment will grow when interest is compounded at regular intervals over a specific time period.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest helps investors make informed decisions about fixed deposits and other investment options. It demonstrates the power of compounding and helps in financial planning.

4. Using the Calculator

Tips: Enter principal amount in INR, annual interest rate as a decimal (e.g., 0.075 for 7.5%), compounding frequency per year, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (quarterly vs annually) results in higher returns due to interest being calculated on previously earned interest more often.

Q3: What are typical compounding frequencies for SBI FDs?
A: SBI offers quarterly, half-yearly, and annual compounding options for fixed deposits.

Q4: Are there tax implications on FD interest?
A: Yes, interest earned on fixed deposits is taxable as per your income tax slab under the Income Tax Act.

Q5: Can I withdraw my FD before maturity?
A: Yes, but premature withdrawal may attract penalties and result in lower interest rates as per SBI's terms and conditions.