A recent study showed that basic statistical returns of financial institutions record around 32.9% in savings accounts, while reaching an impressive 57.7% for fixed deposits. With such a high number of investors deciding to invest in fixed deposits, it is important to understand the return on such investments as well as the reasons for its popularity.
It is advisable for individuals considering this secured investment scheme to learn how their return is calculated. Additionally, they should also learn how to use an online FD calculator to calculate the exact amount of return.
However, before discussing this method of FD calculator monthly interest evaluation, investors must learn the basic formula which is used to calculate an interest.
The formula for calculation of interest
The basic formula used to calculate the total amount received by an investor on fixed deposit investments is as follows.
A = P (1 + r/4/100) ^4n
Here, these variables are:
A = total amount received at maturity,
P = principal sum invested in the fixed deposit account,
r = rate of interest,
n = compound interest frequency.
The above amount is the total return as it includes both the principal investment and interest earned on it. Any investor looking to find this exact amount of revenue must subtract the principal from this amount above.
While it is imperative for investors to know the formula to calculate the exact return on best FD rates in India, it is impractical to depend on this complex calculation for comparison. Consequently, it is advisable for investors to use an online calculator to calculate the revenue to be generated on their investment.
Method of using FD calculator
Investors looking to calculate the return on their fixed deposit investment should follow the simple guide to using a fixed deposit calculator. Usually, these online calculators are extremely easy to use; consulting a guide ensures that an investor follows the recommended method.
Using this calculator without proper knowledge on how to use it carries the risk of wrong inputs which can prove detrimental to the investment as well as the expectation of returns. The FD calculator monthly interest calculation procedure steps are discussed underneath.
- First, an investor must decide on the exact amount of money he or she wants to invest.
- Once this sum to be invested is decided, investors must decide on the type of FD they want to apply for. Customers must choose if they want to go for cumulative or non-cumulative fixed deposits. In the case of non-cumulative rates, it is crucial to decide the interest term. It can be monthly, quarterly, half-yearly or yearly.
- Now investors can start calculating all these data in an online FD calculator. It is better to use a calculator offered by the financial institution where one wants to invest the sum of money. Financial institutions like Bajaj Finserv and others have dedicated online fixed deposit calculators.
- After accessing the online calculator, investors must choose the type of customer they are. There are primarily three options, new customers, existing customers, and senior citizens. Rate of interest offered depends on the type of customer.
- Next, one can access the cumulative or non-cumulative interest option. Along with this option, the interest term should also be selected in case it is a non-cumulative interest. Best FD Rates in India are generally offered on yearly interest terms.
- The value of principal sum for this investment must be put in its relevant field.
- Lastly, investors must put in the tenor for which they want to invest in this fixed deposit account. It generally ranges between 12 and 60 months.
After the completion of these above steps, the amount of money to be received when this fixed deposit account matures is displayed on the page. It is only when an investor has evaluated their FD calculator monthly interest and compared these rates from different financial institutions, that they should select a financial institution for their investment. They should also compare the different interest rates and tenors from the same financial institution to get the best possible deal.