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

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