1. What is the Fixed Deposit Formula?

The fixed deposit formula calculates the future value of an investment based on compound interest. It's essential for financial planning and comparing different investment options.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future Value ($)
• \( PV \) — Present Value/Principal ($)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Compounding frequency per year
• \( t \) — Time in years

Explanation: The formula accounts for compound interest, where interest is earned on both the principal and accumulated interest.

3. Importance of FD Calculation

Details: Accurate FD calculations help investors understand potential returns, compare different FD schemes, and make informed investment decisions.

4. Using the Calculator

Tips: Enter principal amount in $, annual rate as decimal (e.g., 0.05 for 5%), compounding frequency (e.g., 4 for quarterly), and time in years.

5. Frequently Asked Questions (FAQ)

Q1: How does compounding frequency affect returns?
A: More frequent compounding (monthly vs. annually) yields higher returns due to the compounding effect.

Q2: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest includes interest on previously earned interest.

Q3: Are FD returns guaranteed?
A: Fixed deposits typically offer guaranteed returns, unlike market-linked investments.

Q4: How are FD interest rates determined?
A: Rates depend on the bank's policies, tenure, and prevailing economic conditions.

Q5: What are the tax implications?
A: FD interest is taxable as income, though some tax-saving FDs offer deductions under section 80C.