Fixed Deposit Interest Calculator

Compound Interest Formula:

\[ A = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Principal Amount (P):

₹

Annual Interest Rate (r):

Time Period (t):

years

Compounding Frequency (n):

Maturity Amount (A):

Total Interest Earned:

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1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of an investment or loan where interest is added to the principal at regular intervals, allowing the interest to earn additional interest in subsequent periods.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Where:

\( A \) — Maturity amount (₹ or currency)
\( P \) — Principal amount (₹ or currency)
\( r \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( t \) — Time period in years

Explanation: The formula accounts for the effect of compounding, where interest is calculated on both the initial principal and the accumulated interest from previous periods.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest is crucial for financial planning, investment decisions, and comparing different fixed deposit options. It demonstrates how money can grow over time through the power of compounding.

4. Using the Calculator

Tips: Enter the principal amount in ₹, annual interest rate as a percentage, time period in years, and select the compounding frequency. 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 (e.g., monthly vs annually) results in higher returns due to interest being calculated and added more frequently.

Q3: What is the rule of 72?
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.

Q4: Are there any limitations to this calculation?
A: This calculation assumes a fixed interest rate throughout the investment period and doesn't account for taxes or inflation.

Q5: Can this formula be used for loans as well?
A: Yes, the same formula can be used to calculate the total amount payable on compound interest loans.