A fixed deposit (FD) is an incredibly safe method of saving and investing in India. These deposits offer guaranteed returns after a fixed duration of time, making them popular among investors. Fixed deposits are offered by post offices, banks, and non-banking finance companies (NBFC). The rate of interest offered on the fixed deposit by these entities differs.
With FDs, investors earn interests that compound over time. The rate of these interests is informed by prevailing FD interest rates. It is the compounding effect of interest that ensures attractive returns to investors on FDs. Investors can get an estimate of the total amount they will receive upon maturity in advance by using an equation.
How to calculate the maturity amount on FD?
The maturity amount receivable on a fixed deposit can be calculated using the equation
A = P (1 + r/n) ^n*t
A is the amount to be received on maturity
P is the principal invested
r is the rate of interest
t is the number of years till maturity
n is the frequency of compounded interest
The returns that are received on the fixed deposit depend on the frequency of the interest payout as well as the FD interest rates. The interest rates are compounded periodically. This formula determines the total amount that will be received by the investor when the FD matures.
Monthly interest for 1 lakh in bank
The interest amount can be received periodically by the investor instead of as a lump sum once the FD matures. The investor usually has the option to choose the frequency at which they will receive the interest payout, and can go for the monthly option. Rs 1 lakh FD interest per month can also be calculated before an investor chooses this option.
The interest on fixed deposits is usually calculated on a yearly basis and varies roughly between 2.5% and 6% per annum from bank to bank. For instance, if monthly interest for 1 lakh fixed deposit at 7% will be Rs 776. The interest payable will change if the investor opts for quarterly or yearly payout to Rs 2,015 and Rs 8,777 respectively.