Know The Quick Formula To Calculate Your FD Returns

A fixed deposit (FD) or term deposit is a form of investment provided by banks, corporates and non-banking financial companies (NBFCs). These deposits usually come with a higher interest rate as opposed to a savings account. The money you put into an FD is locked in for a set period of time, which can range from 7 days to 10 years. And depending on the maturity period as well as the type of depositor i.e. Non-senior citizens or senior citizens, interest rates on FDs vary respectively. The rate of interest on FDs is set at the time of opening the account and is not affected by market volatility. Determining an FD's maturity amount can be a difficult task, as a result, using an online FD calculator allows you to calculate it from the comfort of your home or office. But what if you don't have internet connectivity or do not know how to use an FD calculator? No need to worry about here is the simple formula using which you can calculate your FD returns in a matter of seconds.

Formula to calculate FD returns

Simple interest FD and compound interest FD are the two kinds of FDs that you can choose from. The following formula is used in the fixed deposit calculator to calculate simple interest FD.

For simple interest FD

P + (P x r x t/100) = M

Here, P is the principal amount i.e. the money you invested, R is the rate of interest, T is the tenure i.e. the period for which you have invested your money and M is the maturity amount.

For instance, if you have deposited Rs 5 lakhs for a tenure of 5 years at a 5.4% interest rate (here the interest rate has been taken of SBI) then your maturity amount will be:

Rs 5,00,000 + (Rs 5,00,000 x 5.4 x 5 / 100) = Rs 6,35,000.

For compound interest FD

P (1+r/n) ^ (n * t) = M

Here, M is the maturity amount, P is the principal amount, R is the rate of interest, N is the number of compounding in a year, and T is the Tenure

For instance, if you have deposited Rs 5 lakhs for a tenure of 5 years at 5 % interest rate, then your returns will be:

Rs 5,00,000 {1 + (5/4)} ^ (4 * 5) = Rs 6,41,019 (approx)

Compound Interest = Maturity Amount - Principal Amount

Rs 6,41,019 - Rs 5,00,000 = Rs 1,41,019 (interest amount)