Fixed Deposit Interest Calculator Sri Lanka

Quarterly Compounding Formula:

\[ A = P \times \left(1 + \frac{R}{100 \times 4}\right)^{4 \times T} \]

Maturity Amount (A):

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1. What is Quarterly Compounding?

Quarterly compounding means that interest is calculated and added to the principal four times per year. This results in higher returns compared to annual compounding because interest earns interest more frequently.

2. How Does the Calculator Work?

The calculator uses the quarterly compounding formula:

\[ A = P \times \left(1 + \frac{R}{100 \times 4}\right)^{4 \times T} \]

Where:

\( A \) — Maturity amount (LKR)
\( P \) — Principal amount (LKR)
\( R \) — Annual interest rate (%)
\( T \) — Time period (years)

Explanation: The formula calculates how your investment grows when interest is compounded quarterly, accounting for the effect of earning interest on previously earned interest.

3. Importance of Compound Interest

Details: Compound interest is a powerful financial concept that allows your savings to grow exponentially over time. The more frequently interest is compounded, the faster your money grows, making it essential for long-term financial planning.

4. Using the Calculator

Tips: Enter the principal amount in LKR, annual interest rate in percentage, and time period in years. All values must be positive numbers to get accurate results.

5. Frequently Asked Questions (FAQ)

Q1: How does quarterly compounding differ from monthly compounding?
A: Quarterly compounding calculates interest 4 times per year, while monthly compounding calculates it 12 times. Monthly compounding yields slightly higher returns due to more frequent compounding periods.

Q2: Are fixed deposit rates in Sri Lanka compounded quarterly?
A: Most Sri Lankan banks offer quarterly compounding for fixed deposits, but it's always best to check with your specific bank as terms may vary.

Q3: What is the minimum investment for fixed deposits in Sri Lanka?
A: Minimum investment amounts vary by bank, but typically start from LKR 1,000 to LKR 10,000 for most commercial banks in Sri Lanka.

Q4: Are fixed deposit returns taxable in Sri Lanka?
A: Yes, interest income from fixed deposits is subject to withholding tax in Sri Lanka. The current rate and thresholds should be verified with recent tax regulations.

Q5: Can I withdraw my fixed deposit before maturity?
A: Most banks allow premature withdrawal, but usually with a penalty such as reduced interest rates or loss of some interest earnings.