A fixed deposit is basically a type of account opened in a bank where a pre-determined rate of interest is paid to you for keeping your money for a specific period of time. They are a safe and easy way to earn guaranteed returns while you sit back and relax.
In fact, you can even know your returns even before you invest in a Fixed Deposit (FD) scheme. It can be done using an online fixed deposit calculator. It is an easy-to-use tool to determine the interests earned as well as the amount that your account will accrue at the end of investment tenure.
What is a Fixed Deposit Calculator?
A fixed deposit calculator is a type of investment calculator that helps users to compute the maturity amount for their deposit based on the existing interest rates for a fixed tenure. It is a user-friendly online tool that helps investors compare different interest rates with different tenures from different banks. All this can help you decide which bank and tenure offer the highest returns on maturity.
How Can a Fixed Deposit Calculator Help You?
Calculating the returns manually from your fixed deposit can be a time-consuming and complicated task. There will always be room for errors while estimating the maturity amount manually. An online fixed deposit calculator allows investors to do the computations without breaking a sweat.
Here are some of the ways using a fixed deposit calculator can help you: –
- Fixed deposit calculations can be complex as they involve multiple variables. But if you use a fixed deposit calculator, you can get accurate results within seconds.
- This financial tool can help you save a lot of time that you might spend estimating your returns.
- A fixed deposit calculator enables users to compare the interest rates and maturity amounts offered by different banks. This way, investors can make informed decisions for their future.
The Formula to Calculate Fixed Deposit Maturity Amount
There are basically two types of fixed deposits. One is a simple interest fixed deposit, and the other is a compound interest fixed deposit.
The formula for the simple interest fixed deposit is as follows: –
M = P + (P x r x t)/100
P – The principal amount
R – interest rate per annum
T – tenure (years)
Let us take an example to better understand this formula. Let’s say you deposit a sum of Rs. 50,000 for 4 years at a 10% rate of interest, your maturity amount will be: –
M = Rs. 50,000 + (50,000 x 10 x 4)/100
= Rs. 70,000
The formula for calculating the maturity amount for compound interest fixed deposit is: –
M = P + P*[(1 + i/100)t – 1]
P – The principal amount
i – the interest rate per period
t – tenure (years)
For instance, taking the same variables as before, the compound interest fixed deposit will accrue: –
M = Rs. 50,000 + 50,000*[(1 + 10/100)4 – 1]
Or, Rs. 73, 205
Advantages of Using a Fixed Deposit Calculator
Using a fixed deposit calculator can help you know the exact amount you will receive on completion of the investment tenure. Here are some of the many advantages of using a fixed deposit calculator: –
- Easy to Use
A fixed deposit calculator is an easy to use tool that provides accurate results using the mathematical formula that we discussed.
- Accurate Results
If you use a fixed deposit calculator, you can take a look at the accurate maturity amount that you will receive at the end of the tenure.
- Compare
By comparing the results for different FD schemes, you will be able to choose the fixed deposit to fulfil your financial objectives.
- Help Make Better Choices
Using a fixed deposit investment calculator can let you know everything about the scheme before investing in it. And when you know what you are getting into, you make better and informed choices without any worries.
- Financial Planning
Not every investment option lets you know the returns before investing in it. In the case of a fixed deposit, you can compute the interest earned and the maturity amount by using a fixed deposit investment calculator. Knowing your future returns can help fulfil your financial objectives. You can visit Investment Simplified to calculate your returns and get answers to other investment-related concerns.
All in all, a fixed deposit is a safe and trusted investment tool among people. It offers higher interest rates than other guarantee plans like bonds. Furthermore, it is also flexible in terms of the tenure of investment. All these benefits make fixed deposits a good investment option.
