# Know What You Yield By Using Fixed Deposits Calculator

Investment in fixed deposits by far is considered the best way of savings as there is surety of getting back the invested amount. Also, there is assurance of receiving the stated interest. The returns on fixed deposits are predetermined. These returns are credited in the depositor’s account either at the time of maturity of the deposit or are paid off at the frequency decided by the depositor. The depositor can calculate the interest on the fixed deposit using the fixed deposits calculator.

FD Calculator is an online device designed to compute the maturity value of the deposit. It helps in calculating the interest receivable on the fixed deposit made for a certain period of time. It saves time and provides the realistic result. The user can find the future value of a fixed deposit by entering the FD interest rates, deposit amount and the period of investment in the fixed deposit calculator. The value displayed is calculated using the interest calculator formula which is:

**A = P (1 + r/n)**** nt**

**I = A – P**

The paid on FD interest rates is calculated using two methods. The simple interest method and the compound interest method.

**Simple Interest Method **– In this method, the interest is calculated on the initially deposited amount for the entire deposit period. The interest receivable remains same throughout the tenure of the period. The returns on such deposits are lower.

**Compound Interest Method** – Deposits yielding interest at compound interest give higher returns. As the amount of interest earned in the previous period is added to the initial principal and the new amount is taken into consideration for calculating the interest of next period. That is the principal amount keeps on changing during the tenure.

Comparison between interest calculated on fixed deposits using simple interest formula and compound interest formula:

To compare the earnings on fixed deposit yielded on simple interest and compound interest let’s take an example:

**Example** – A person makes a deposit of ₹ 20,000 for the period of 10 years. The interest on deposit is paid at the FD interest rate of 7.00% per annum. The interest earned on deposit at simple interest and compound interest is given below:

**Simple Interest Method:**

Deposit Amount -₹ 20,000

Tenure – 10 years

Interest Rate – 7.00% p.a.

Interest Amount – ₹ 14,000

Maturity Amount – ₹ 34,000

The simple interest is calculated using the below mentioned formula:

**A = P (1 + rt) **

Where:

A = Maturity Value

P = Principal Amount

I = Interest Amount

r = Rate of Interest per year in decimal

t = Time Period involved in months or years

**Compound** **Interest Method:**

Deposit Amount – ₹ 20,000

Tenure – 10 years

Interest Rate – 7.00% p.a.

Interest Amount – ₹ 20,031

Maturity Amount – ₹ 40,031

The compound interest is calculated using the formula:

**A = P (1 + r/n)**** nt**

Where,

A = the maturity value

P = the initial deposit amount

r = the annual interest rate

n = the number of times that interest is compounded per year

t = the number of years

The above example shows that the compounded interest is higher than the simple interest. The bank decides the method of calculating interest on fixed deposits. The user can check the amount of interest receivable using the specific fixed deposits calculator.