What is an Online Fixed Deposit Calculator?

An online FD calculator is a tool that helps investors identify the sum of money that will be accrued in their fixed deposit at the time of maturity. The calculator uses variables, such as the investment amount, and fixed numbers, such as the interest rate, to give investors an accurate picture of their corpus.

Most online FD calculators use two types of calculations, based on whether the investor selects simple interest or compound interest options.

Simple Interest on Fixed Deposits

In this, a prefixed rate of interest and fixed investment period (also known as a term period) are used. The tenure in years, rate of interest per annum and the principal amount are multiplied to find out the total sum the investor can expect.

The formula for this is:

SI: P x R x T/100
P = principal amount
R = rate of interest
T = total term period

Let’s look at an example to understand this better.

Rajshree has decided to open an FD with her bank. Her bank offers her an interest rate of 6.6%. She deposits ₹ 1lakh into the account for 5 years. As per the formula above, her interest would be = 1,00,000 x 6.6 x 5/100 = ₹ 33,000. As per this, her total accrued wealth at the end of 5 years would be ₹1,33,000.

Compound Interest on Fixed Deposits

The term compound interest is referred to the interest that is accrued on the principal amount as well as the yearly interest. The total sum is calculated by multiplying the principal amount with the interest, and raising it to the power of the number of compounds per year multiplied by time.

The formula for this is:

A = P (1+r/n) ^ (n * t)
A = Maturity amount
P = Principal amount
r = rate of interest
n = number of compounding in a year
t = number of years

Let’s look at an example to understand this better.

Jhanvi is investing ₹ 10,000 for a period of 3 years. The bank offers her a compounding interest rate of 10% (which means that every quarter, the interest would compound by 2.5%). Based on these numbers and the formula shared above, the calculation would be:

A= 10,000 {1 + (0.1/4)} ^ (4 * 3)
A = 10,000 (1 + 0.025) ^ (12)
A = 10,000 (1.025) ^ (12) = Rs. 13,449 (approximately)
Compound Interest (CI) = Maturity Amount – Principal Amount
CI = 13,449 – 10,000 = Rs. 3,449
At the end of 3 years, Jhanvi will have ₹ 13,449

How to use an FD calculator with an investment based approach?

To use an FD calculator with an investment based approach, investors must:

  • iconbullet Select the applicable age. The online FD calculator generally offers two options: a) Below 60 years of age, b) Above 60 years of age
  • iconbullet Enter their total investment amount, for instance, ₹1,00,000
  • iconbullet Select the term period, for instance, 5 years.
  • iconbullet Add the interest rate applicable to their bank.
  • iconbullet Select the type of FD, for instance: a) Cumulative, b) Quarterly Payout, c) Monthly Payout, d) Short term FD
  • iconbullet Click the calculate button. The amount will be displayed on the screen.

How to use an FD calculator with a goal -based approach?

To use an FD calculator with a goal-based approach, investors must:

  1. Enter the amount they wish to earn, for instance, ₹ 1,00,000
  2. Select the applicable interest rate.
  3. Select the time period by which they wish to earn this amount, for instance, 5 years.
  4. Click the calculate button. The required investment amount will be displayed.

Using an FD calculator can be extremely beneficial for investors who want to plan ahead for their life goals. An online FD calculator not only lets users understand how much they can earn, but also the amount that should be invested over a period of time to meet specific needs in the future.

  • Disclaimer

    Source: https://www.thehindubusinessline.com/money-and-banking/The-Latest-Fixed-Deposit-Interest-Rates-July-8-2022/article64808518.ece