I think I can help you know how to calculate FD interest. It is not as complicated. You should know that to calculate fixed deposit interest, there are two methods: FD interest calculations with simple interest and compound interest. I’ll share examples of both types below:
1. Simple Interest Formula
If your FD is for a short tenure, say 2 years, bank may offer simple interest, the FD interest calculation formula is:
Simple Interest = (P × R × T) / 100
Here, P is Principal amount, i.e., your deposit, R is the annual rate of interest and finally T is Time period
So if bank offers simple interest on your investment of Rs. 50000 for 2 years at 6%, this will be the calculation:
Simple Interest = (50,000 × 6 × 2) / 100 = Rs. 6,000
So the total maturity amount will be Rs. 56,000
2. Compound Interest Formula
Now moving the FD compound interest formula, most banks offer compound interest.
Compound Interest formula is:
P × (1 + R/N)^(N×T) – P
Here, P is Principal amount, R is annual interest rate, N is the number of compounding periods in a year, for example 4, and finally T is for time in years.
If bank offers compound interest on your Rs. 50,000 investment at 6% annual interest and at a quarterly compounding frequency for 2 years, this will be the calculation:
Compound Interest = 50,000 × (1 + 0.06/4)^(4×2) – 50,000 = Rs. 6,272
So the total maturity amount would be ₹56,272