Fixed Deposit (FD) Formula, Tutorial, Equations, Example

Calculate Fixed Deposit (FD) - Definition, Formula and Example

Definition:

Fixed Deposits are a significant mode to invest for those who value security more than returns. This tutorial explains you how to calculate the maturity value and interest earned from FD.

Fomula:

A = P x (1 + r/n)nt I = A - P
Where,
A = Maturity Value P = Principal Amount r = Rate of Interest t = Number of Period n = Compounded Interest Frequency I = Interest Earned Amount

Example :

An amount of Rs.15000 is deposited in a bank for 2 years and paying an annual interest rate of 5%, compounded quarterly.

Given :

Principal Amount (P) = Rs.15000 Rate of Interest Amount (r) = 5% = 0.05 Number of Period (t) = 2 years Compounded Interest (n) = 4 (quarterly)

To Find :

Fixed Deposit (FD)

Solution :
Step 1 :

Maturity Value (A) = P x (1 + r/n)nt = 15000 x (1 + 0.05/4)4x2 = 15000 x (1 + 0.0125)8 = 15000 x (1.0125)8 = 15000 x 1.104486101 Maturity Value (A) = Rs. 16567.29

Step 2 :

Interest Earned Amount (I) = A - P = 16567.29 - 15000 Interest Earned Amount (I) = Rs. 1567.29

Result :

Maturity Value (FD) = Rs. 16567.29 Interest Earned Amount (I) = Rs. 1567.29

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