This FD calculator helps you figure out how much interest you will earn from your fixed deposit and the maturity amount you will have in your account at the end of the term. There is in depth information about this savings instrument below the form.
What is a fixed deposit?
In finance, a fixed deposit (FD) is an instrument provided by banks to investors willing to deposit their savings in exchange of a higher rate of interest than a regular savings account, over a certain fixed period of time called maturity date. In order to deposit money in a FD the bank may or may not request you to create a designated account.
It is referred to in different ways depending on the country. For instance in US, Australia, New Zealand this is called term deposit or time deposit, while in United Kingdom and India this is called bond.
In regard of its risk profile this investment type is considered a very safe one, while one of its main peculiarities is that the money cannot be withdrawn before maturity as compared to a recurring deposit or a demand deposit.
In most cases, but that depends as well on the market conditions, FD rates vary between 3 to 11% per year, while the term money can be deposited may vary from few months to up to 10 years.
Main advantage of fixed deposits is that FDs offer higher interest rates than other saving accounts types, while the longer the term of deposit is, the higher the rate of interest.
In case you analyze such investment opportunity you can use this FD calculator that allows you choose the compound interest rule, select the desired term in months or years and even adjust the growth of your savings by an assumed level of inflation.
Example of a calculation
Let’s assume that an individual makes a fixed deposit of $100,000 for 2 years while the interest is 5% compounded annually and the inflation is considered to be 1%.
- Final Deposit Balance after 2 years = $110,250.00
- Final Deposit Balance inflation adjusted = $108,077.64
- Total interest earned = $10,250.0009 Apr, 2015 | 0 comments