Interest Calculator On FD Formula

Compound Interest Formula:

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

Principal Amount (P):

Annual Interest Rate (R):

Compounding Frequency (n):

Time Period (T):

years

Maturity Amount (A):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Compound Interest Formula?

The compound interest formula calculates the maturity amount for fixed deposits by accounting for interest earned on both the initial principal and accumulated interest from previous periods. This results in exponential growth of your investment over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

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

Where:

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

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

3. Importance of Compound Interest Calculation

Details: Understanding compound interest is crucial for financial planning, investment decisions, and retirement savings. It demonstrates how small, regular investments can grow significantly over time through the power of compounding.

4. Using the Calculator

Tips: Enter principal amount in currency, annual interest rate as a percentage, select compounding frequency, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's 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, leading to faster growth.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (e.g., monthly vs annually) results in higher returns because interest is calculated and added to the principal more often.

Q3: What is a typical compounding frequency for fixed deposits?
A: Most banks offer quarterly, half-yearly, or annual compounding, though some may offer monthly compounding as well.

Q4: Can I use this calculator for other investments?
A: While designed for fixed deposits, this formula can be applied to any investment that compounds interest at regular intervals.

Q5: How accurate is this calculator for real-world applications?
A: This provides a mathematical estimate. Actual returns may vary slightly due to rounding practices and specific financial institution policies.