This Fixed Deposit Calculator (FD Calculator) gives you the return on the Principal when interest is paid on quarterly compounding. Effective yield is the actual return on your Fixed Deposit. It depends on the rate of interest and the frequency of compounding. In India, most of the banks do the compounding on quarterly basis and thus this Fixed Deposit Calculator can be used to know the maturity value of your fixed income deposits / securities when the compounding is done on quarterly basis.
Fixed Deposit schemes are offered by all banks in india (FD schemes of SBI, PNB, ICICI Bank, HDFC Bank, IDBI Bank, Bank of India, Bank of Baroda, Corporation Bank are available at respective websites. However, they use the same FD formula for arriving at maturity value of fixed deposits ).In India, banks use quarterly compound interest calculator in rupees.
Compound Interest Formula / How to calculate compound interest / Compounding of Interest on Fixed Deposits Explained :
Compound interest arises when interest is added to the principal so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding. The following formula gives you the total amount one will get if compounding is done:-
A = Final Amount that will be received
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) (it should not be in percentage)
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
quarter it will be 4
t = number of years
[To arrive at the interest amount you can further use the formula Interest = A - P ]
Example: Let us assume that an amount of Rs. 1500/- is deposited in a bank for 6 years and paying an annual interest rate of 4.3%, compounded quarterly.
A. Thus, the above formula values will be P = 1500, r = 4.3/100 = 0.043, n = 4, and t = 6:
So, the balance after 6 years is Rs.1,938.84 (or rounded to Rs.1939).
[To arrive at the interest amount = A - P = 1938.84 - 1500 = Rs. 438.84 ]