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Fixed Deposit Formula:
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The fixed deposit interest formula calculates the maturity amount of an investment with annual compounding. It shows how your money grows over time through the power of compound interest.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how much your initial investment will grow when interest is compounded annually over a specific time period.
Details: Understanding compound interest is crucial for financial planning, investment decisions, and retirement savings. It demonstrates how money can grow exponentially over time.
Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 5 for 5%), and time period in years. All values must be positive numbers.
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 often is interest compounded in this calculator?
A: This calculator assumes annual compounding, meaning interest is added to the principal once per year.
Q3: Can I use this for monthly compounding?
A: No, this calculator is specifically designed for annual compounding. For monthly compounding, a different formula would be needed.
Q4: What is the rule of 72 in compound interest?
A: The rule of 72 estimates how long it takes for an investment to double: 72 divided by the annual interest rate gives the approximate number of years.
Q5: Are there any taxes on fixed deposit interest?
A: Yes, interest earned on fixed deposits is typically taxable income, which may affect the actual returns. This calculator shows pre-tax amounts.