Friday, 31 March 2017

Calculate Fixed Deposit to Know Magnitude of Your Returns

The customers of any bank have the leverage to calculate their returns on fixed deposit. They can do so by using the Fixed deposit calculator which gives them the return on their Principal when interest is paid on quarterly compounding. The effective yield is the actual return which gets actually generated on the Fixed Deposit. It is based on the rate of interest and the frequency of compounding. Many banks in India do the compounding on a quarterly basis and thus the Fixed Deposit Calculator can be used to know the maturity value of fixed income deposits/securities.

Fixed Deposit Calculator

Most of the banks in India such as SBI, PNB, ICICI Bank, HDFC Bank, IDBI Bank, Bank of India, Corporation Bank, Bank of Baroda offer fixed deposit schemes and use the FD formula for arriving at the maturity value of fixed deposits.

Compound Interest Formula-

When interest component gets added to the principal amount so, from that moment, the interest that has already been added also itself accrues interest. This interest added to the principal amount is called compounding. The following formula gives the total amount which gives the compounding value as:

A= P(1+r/n)nt

Where,
A = Final Amount that will be obtained
P = Principal Amount (i.e. initial investment)
r =  Annual nominal interest rate (as a decimal i.e. if interest is paid at 5.5% pa, then it will be 0.055)
n = number of times the interest is compounded per year (i.e. for monthly compounding n will be 12, for half year compounding it will be 2 and for the quarter it will be 4).
t = number of years
Note : To arrive at the interest amount you can further use the formula Interest = A - P

Simple Interest Formula-

Simple Interest is used to calculate the FD interest rate on your deposit amount. Interest is always dependent on the original principal amount or sum invested. In this calculator, simple interest is calculated by multiplying the principal amount by the number of periods i.e. time interval.

 SI Interest = (P * R * T ) / 100

SI =Simple Interest
P=Principal amount
R=Rate of Interest
T= Tenure or time period

FD Calculator Monthly Interest-

Fixed Deposit Monthly Interest Calculator is used to calculate the interest you would like to earn based on the Deposit Amount, Rate of Interest and Deposit Period.

Deposit Amount: Whenever a customer opens an FD account, the deposit is made only once and the minimum amount starts as low as ₹ 1000 and can go upto ₹ 10 crores or above.

Rate of Interest : The interest payout or compounding frequencies varies from bank to bank on their FD schemes. The interest rates are usually done on a quarterly, half-yearly or annual basis. However, the interest rate for a tax-saving FD is ascertained at the beginning of every financial year by the government and is identical across the banks.

Deposit Period: The deposit period of FD ranges anywhere between 7 days and 10 years. It differs from bank to bank. The longer the tenure a customer may choose, the higher will be the interest rate subject to the selection of FD.

Deposit Maturity Calculator-

An investment of ₹ 1,000.00 for 12 months will fetch you interest at 6.00% p.a. and will give you a maturity value of around ₹ 1,060.00.

Benefits of Investing in FD-

Guaranteed Returns : FD is a secured investment instrument which gives guaranteed returns on the amount invested.

Develops saving habit : The investment made in an FD is blocked for a fixed time period which inculcates the habit of saving.

Better returns than savings account : It provides better returns as against savings account as the interest rate is higher. In a savings account, you can earn interest upto 4% as compared to the starting rate of 6% in an FD.

Early withdrawal : Invested amount in FD can also be withdrawn earlier prior to the maturity date by paying a penalty charge.

Interest payment available at different tenures :  Interest is payable only at maturity, annually or monthly depending on the time period chosen by the customer.

Flexible tenure: The customers have the flexibility to enjoy different tenure options and block their money as long as they want. They can invest their money for a time period ranging from 7 days to 10 years.

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