Question 1

What is a Fixed Deposit (FD)?

Accepted Answer

A Fixed Deposit is a financial instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure at a predetermined interest rate. The interest is compounded periodically, and the principal plus accumulated interest is paid out at maturity. FDs offer guaranteed returns and are considered a low-risk investment.

Question 2

How is FD maturity amount calculated?

Accepted Answer

FD maturity uses the compound interest formula: A = P × (1 + r/n)^(n×t), where P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the tenure in years. Interest earned = A − P.

Question 3

How often do banks compound FD interest?

Accepted Answer

As per RBI's Master Direction on interest rates, Indian banks compound term-deposit interest at quarterly rests (every 3 months) by default. Major banks such as SBI, HDFC, ICICI, and PNB follow quarterly compounding. This calculator also lets you choose yearly, half-yearly, or monthly compounding to compare scenarios.

Question 4

What is Effective Annual Yield?

Accepted Answer

Effective Annual Yield (EAY) is the actual annual return after accounting for intra-year compounding: EAY = (1 + r/n)^n − 1. Because interest is compounded more than once a year, the effective yield is slightly higher than the nominal rate. For example, 7% nominal compounded quarterly gives an effective yield of about 7.19%.

Question 5

Does a higher compounding frequency give higher returns?

Accepted Answer

Yes. For the same nominal interest rate, more frequent compounding produces a higher maturity amount because interest is added to the principal more often and starts earning interest sooner. Monthly compounding yields slightly more than quarterly, which yields more than half-yearly or yearly.

Question 6

Is my data sent to any server?

Accepted Answer

No. All calculations happen entirely in your browser using JavaScript. No data is sent to any server.

FD Calculator

Frequently Asked Questions

FD Calculator

Frequently Asked Questions