How to calculate fixed deposit money?
Hi,
To calculate fixed deposit (FD) money, you just need to know four things:
The principal amount which you are depositing, Interest rate, time period and interest type i.e. simple or compound interest.
Simple interest formula -
M = P + (P x r x t/100)
Where:
- M = Total money (maturity amount)
- P = Principal (amount you deposit)
- r = Interest rate (in decimal, e.g. 6% = 0.06)
- t = Time in years
2,00,000 for 3 years at 7% interest, the equation reads –
M= Rs. 2,00,000 + (2,00,000 x 7 x 3/100)
= Rs. 2,42,000
In most banks, FD works on compound interest, which means you earn interest not only on your money but also on the interest that gets added over time.
Compound interest formula-
M= P + P {(1 + i/100) t – 1}
Where:
- M = Total money (maturity amount)
- P = Principal (amount you deposit)
- i = Interest rate (in decimal, e.g. 6% = 0.06)
- t = Time in years
If you deposit ₹2,00,000 in FD for 3 years at 7% annual interest, compounded quarterly:
M= 200000+200000 ({1=7/100}3-1)
So the interest is ₹45,009 and maturity amount is ₹2,45,009.