FD Return Calculator (Compound Interest)
About FD Return Calculator with Compounded Interest Rate
An FD Return Calculator with compounded interest helps you estimate the maturity amount by considering the interest that is reinvested periodically. You can use it by entering the principal amount, interest rate, tenure, and compounding frequency (monthly, quarterly, half-yearly, or annually) to calculate the total maturity value.
What is FD?
A Fixed Deposit (FD) is a secure investment option offered by banks and financial institutions, where you deposit a lump sum for a predetermined period at a fixed interest rate.
How FD Works
When you invest in an FD, your money is deposited for a chosen duration at a specific interest rate. If the interest is compounded, it is added to your principal at regular intervals, increasing your returns over time.
Advantages of FD
- Safe investment with assured returns.
- Flexible tenure ranging from 7 days to 10 years.
- Interest compounding results in higher earnings.
- Can be used as collateral for loans.
Disadvantages of FD
- Returns are lower compared to equity investments.
- Premature withdrawals may lead to penalties.
- Interest earnings are taxable as per your income tax slab.
- Returns may not always beat inflation.
Example of Compounded Interest Rate FD
Suppose you invest ₹1,00,000 in an FD at an annual interest rate of 6%, compounded quarterly for 3 years:
- Principal (P) = ₹1,00,000
- Rate of Interest (R) = 6% per annum
- Time (T) = 3 years
- Compounded quarterly (4 times a year)
The maturity amount can be calculated using the formula:
A = P(1 + R/(100 × n))^(n × T)
Where:
- A = Maturity Amount
- P = Principal Amount
- R = Annual Interest Rate
- n = Number of times interest is compounded in a year
- T = Time period in years
Substituting the values:
A = 1,00,000(1 + 6/(100 × 4))^(4 × 3)
A = 1,00,000(1 + 0.015)^12
A = 1,00,000(1.015)^12
A = 1,00,000(1.1956)
A = ₹1,19,560
So, the maturity amount after 3 years will be approximately ₹1,19,560.
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