1. What is the Fixed Deposit Interest Formula?

The fixed deposit interest formula calculates the maturity amount of an investment based on daily compounding. It provides an accurate estimate of returns on fixed deposit investments over a specific number of days.

2. How Does the Calculator Work?

The calculator uses the daily compounding formula:

Where:

• \( A \) — Maturity amount ($)
• \( P \) — Principal amount ($)
• \( R \) — Annual interest rate (as decimal)
• \( D \) — Number of days

Explanation: The formula accounts for daily compounding by dividing the annual rate by 365 and adjusting the exponent based on the number of days invested.

3. Importance of Daily Compounding

Details: Daily compounding provides more accurate results than simple annual compounding as it calculates interest earned each day, leading to slightly higher returns over time.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as a percentage, and number of days. All values must be valid (principal > 0, rate > 0, days ≥ 1).

5. Frequently Asked Questions (FAQ)

Q1: Why use daily compounding instead of annual?
A: Daily compounding provides more accurate results as it calculates interest earned each day, leading to slightly higher returns over time.

Q2: What is the difference between this and simple interest?
A: Compound interest calculates interest on both principal and accumulated interest, while simple interest only calculates on the principal amount.

Q3: Are there any fees or taxes considered in this calculation?
A: This calculator provides the gross maturity amount before any applicable fees or taxes. Actual returns may vary based on financial institution policies and tax regulations.

Q4: Can this formula be used for any currency?
A: Yes, the formula works for any currency as long as the principal and rate are consistent. The calculator displays results in dollars but can be mentally converted.

Q5: How accurate is this calculation compared to bank calculations?
A: This provides a close approximation, but actual bank calculations may vary slightly based on specific compounding methods and rounding practices.