A Fixed Deposit or FD is a long-term investment tool which helps investors save money for the long term. The investors are allowed to choose a fixed tenure for which the deposit will be kept with the bank. FD investment is better for those who are looking for long-term wealth creation as it offers high-interest rates as compared to a savings account.
An FD calculator helps investors to calculate the returns offered by a fixed deposit. You will be able to calculate the maturity amount of FD by providing a few basic details. It is designed to calculate the maturity amount, interest rate and tenure of a fixed deposit. So, it is always advisable to use the FD calculator as it gives you an idea of your earnings in advance before you invest in a fixed deposit.
We will be discussing an FD calculator in detail here.
1. How to Use an FD Calculator?
FD calculator is a user-friendly online calculator. The below steps can help you to use the FD calculator conveniently.
- Fill in the deposit amount which you like to invest in FD.
- Choose the rate of interest and compounding period for interest
- Fill the tenure of the FD
- After all these steps, you will get the estimated maturity amount.
2. Why Should you Use an FD calculator?
The FD calculator helps you to find out the maturity amount easily on your fixed deposit. A fixed deposit gives you guaranteed returns with minimal risk. Other investments like mutual funds carry considerable risk and may not be right for risk-conservative investors.
An FD calculator helps you to compare various types of FD schemes offered by financial institutions. You can choose any one scheme which suits your budget.
3. How Does the FD Calculator Work?
The fixed deposit calculator is an easy online tool. It offers results based on the FD input provided. You will need to fill in the principal amount you want to invest in FD. Following that, select the interest rate and compounding time for interest, i.e., monthly, quarterly, or annually. Fill in the tenure of the FD in which you want to invest. At last, click the calculate button, and you will instantly get the maturity amount. There are two major methods of calculating FD interest, Simple Interest and Compound Interest.
Simple interest on FDs refers to the interest earned on the principal amount invested, and compound interest refers to the interest earned on the principal amount as well as the interest. You should note that the greater the principal amount and longer the tenure, the higher interest can be earned due to the power of compounding.
4. FD Interest Calculation Formula:
It is an easy process to calculate the FD maturity amount and interest to be earned by using an FD interest calculator. You just need to provide a few values, such as the principal amount, duration and interest rate. Then you need to select a type of interest, like simple or compound and choose the frequency. Once you have entered these values in the FD calculator, the result will be automatically generated.
Here are the formulas that are used to calculate interest on fixed deposits.
SI= P x R x T/100
SI = Simple interest
P = Principal amount
R = Interest rate (%)
T = Tenure of the FD
A= P (1 + R/N) N x T
A = Maturity amount
P = Principal amount
R = Interest rate
N = Compound frequency in a year
T = Number of years
Benefits of FD calculator
There are lots of benefits of using an FD calculator; some prime merits are as below.
- FD Maturity amount calculation is extremely easy and time-saving if you use an FD calculator.
- You can get accurate value; hence it helps you to plan your financial budget.
- You can use this tool to compare returns for different types of FD rates, amounts, and maturity values.
- You can use this tool multiple times.
Before you choose to invest in a fixed deposit, you need to make sure of the clarity about the offered returns and applicable terms and conditions. You can have a clear idea about this by using the FD calculator.