1. What is the Fixed Deposit Formula?

The fixed deposit formula calculates the future value of an investment based on compound interest. HDFC Bank and other financial institutions use this formula to determine the maturity amount of fixed deposits.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future Value of the investment
• \( PV \) — Principal investment amount
• \( r \) — Annual interest rate (in decimal)
• \( n \) — Number of times interest is compounded per year
• \( t \) — Time the money is invested for (in years)

Explanation: The formula accounts for compound interest, meaning interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of FD Calculation

Details: Understanding the future value of your fixed deposit helps in financial planning, comparing investment options, and setting realistic savings goals.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as a percentage, select compounding frequency, and investment period in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (e.g., monthly vs. annually) results in higher returns due to the "interest on interest" effect.

Q3: Are FD interest rates fixed for the entire term?
A: Typically yes, HDFC Bank fixed deposits offer fixed interest rates for the chosen tenure.

Q4: What is the minimum investment for HDFC Bank FDs?
A: The minimum investment amount varies, but generally starts at ₹5,000 for regular FDs.

Q5: Are there tax benefits on FDs?
A: Tax-saving FDs have a 5-year lock-in period and offer tax benefits under Section 80C of the Income Tax Act.