# How to Calculate the FD Interest Rates?

4.3 #### When you open an account, the tenure and interest rate on FD varies between banks. The FD calculator computes the interest you earn on the deposit in such cases

A Fixed Deposit is a financial instrument that banks and financial institutions offer customers in India. It is among the safest and oldest investment options that provide high returns with flexible tenure options and win the trust of the older and younger generations. You can open an account online without visiting the bank branch with digital technology.

When you open an account, the tenure and interest rate on FD varies between banks. The FD calculator computes the interest you earn on the deposit in such cases. It uses variables like the deposit amount, interest rate, and tenure to calculate the maturity amount consisting of the total interest earned on the deposit.

Using the Calculator

Enter the FD amount in the first tab, followed by the Fixed Deposit rates and duration. Click the calculate button, and the estimated maturity amount appears on the screen. Check the total interest in the column next to the maturity amount. FD is all about minimising risks and guaranteeing returns. It absorbs losses, and the returns act as emergency corpus.

Benefits

The FD calculator is an online tool without the scope for errors and discrepancies. It computes all complicated formulas within seconds, reducing errors and saving time and effort. Since the calculator is free, you can use it multiple times and compare the returns for different combinations of rates, tenures, and amounts.

Formula

There are two ways of calculating FD rates: simple and compound. Simple interest is the interest earned on an investment at a fixed rate for a specific period. The formula is:

SI = P x R x T/ 100

Here SI = Simple Interest

P = Principal Amount

R = Interest Rate

T = Tenure of Deposit

Compound interest is the interest rate on FD earned on principal and interest amounts by multiplying the principal amount with interest raised to the tenure in years for compounding. The formula is:

A = P (1+r/n) ^ (n * t)

Here A = Maturity Amount

P = Principal Amount

R = Interest Rate

N = Number of compounding in a year

T = Number of years

Conclusion

When comparing the Fixed Deposit schemes, consider the deposit period, applicant’s age, and current economic conditions. The tenure varies between seven days to 10 years, whereas the interest ranges between 2.5% to 5.6%. Note that senior citizens get preferential rates from the bank. Banks correct their interest rates as per the changes prevailing in the economy, including the repo rate of the Reserve Bank of India and inflation.