Fd Calculator With Compound Interest

Compound Interest Formula:

\[ A = P \times \left(1 + \frac{R}{100 \times n}\right)^{n \times T} \]

Principal Amount (P):

currency units

Annual Interest Rate (R):

Compounding Frequency (n):

Time Period (T):

years

Maturity Amount (A):

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1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. It's often referred to as "interest on interest" and makes a sum grow at a faster rate than simple interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times \left(1 + \frac{R}{100 \times n}\right)^{n \times T} \]

Where:

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

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

3. Importance of Compound Interest Calculation

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

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, select compounding frequency, and time period. All values must be positive numbers to get accurate results.

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.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (monthly vs annually) results in higher returns due to interest being calculated and added more often.

Q3: 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 approximate years.

Q4: Can compound interest work against me?
A: Yes, when borrowing money, compound interest can significantly increase the total amount you need to repay over time.

Q5: Is this calculator suitable for all types of investments?
A: This calculator is specifically designed for fixed deposits with compound interest. Other investments may have different calculation methods.