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A fixed deposit is the most commonly used financial tool that ensures the growth of the invested money after a certain tenure. In a fixed deposit, you invest lump sum money for a particular tenure in a bank or a financial institution to earn interest. The calculation related to a fixed deposit may seem a bit complex if you are not good with numbers. There are several fixed deposit calculators available online to make the interest and maturity amount calculation of your fixed deposit. Here’s a quick overview of the FD calculator.
All About FD Calculator
FD Calculator is the easiest mode to check the maturity amount and interest earned on the money invested in the desired tenure. It uses the complex interest calculation formula of the fixed deposit and presents you with the answer within a few seconds.
Calculations of an FD Calculator
FD calculator follows the basic formula of simple interest and compound interest to calculate the interest earned and the maturity amount.
In the case of simple interest, the interest is calculated on the initial principal amount using the following formula.
I =P x r x t ÷ 100
Where I = interest earned
r=rate of interest
In the case of compounding the interest, the following formula is used.
A = P (1+R/100) ^N
Where A stands for the maturity amount, P for the principal amount, R for the rate of interest and N for the number of months or years in the tenure.
For instance, if you are investing Rs 1,00,000 for 3 years at an interest rate of 10%, the calculation would be the following.
P= Rs. 100000
N= 3 (if compounded annually)
Placing the following values in the given formula, the maturity amount A = Rs. 132100
Thus, the interest earned over 3 years (I) = Rs. 32100.
The whole calculation may seem complex to you. This is why you need an FD calculator.
Once you enter the required details, the FD calculator makes this complex calculation within a minute to provide you with the exact numbers.
Components of FD Calculator
To use an FD calculator, one must provide the following components correctly to ensure the correct calculation by the FD calculator.
- Principal amount: The amount you want to deposit in a fixed deposit account is its principal amount.
- Tenure: The desired time span you want to keep your money invested in a fixed deposit.
- Interest rate: The rate of interest offered by the bank on the fixed deposit is fixed by the bank. The interest rate on bank Fixed Deposits is between 5% – 7.5% and an additional 0.5% for senior citizens.
How to use an FD Calculator?
FD calculator has been designed in a simple and organized manner to facilitate common people to understand and use it. You have to follow the following simple steps to use an FD calculator.
- Open an FD calculator (preferably of the bank you are planning to invest in)
- Insert the amount you want to invest in the fixed deposit
- Select the tenure of fixed deposit
- You may or may not have to provide the interest rate.
After entering the relevant details, the FD calculator shows you the maturity amount and the interest earned on the principal amount in a few seconds.
Advantages of using an FD Calculator
Since fixed deposit is the safest investment option, FD calculators are of great help whenever you decide to invest in it. It has multiple benefits that are mentioned below.
- It serves as the most simple and easy way to make calculations on fixed deposit.
- It makes the complex calculation of interest rate effortless.
- You can determine the maturity amount even before investing.
- You can check the interest earned for different tenures for comparison.
- You can access FD calculators online for free.
- It helps you to plan the investment even before investing.
Fixed deposit is an investment option for those who are averse to risk. It ensures good returns at the end of the tenure. The fixed deposit serves as a secured investment with assured returns. By using an FD calculator, you can determine the interest to be earned and the maturity amount you will be handed at the end of the tenure.