1. What is Fixed Deposit?

Fixed Deposit is a financial instrument provided by banks or financial institutions where an investor deposits a sum of money for a fixed period at a fixed interest rate.

2. How Does the Calculator Work?

The calculator uses the Fixed Deposit formula:

Where:

• \( PRT \) — Principal Amount (initial investment)
• \( R \) — Rate of Interest per Annum (as decimal)
• \( FIP \) — Frequency of Interest Paid (times per year)
• \( np \) — Number of Periods (years)

Explanation: The formula calculates the future value of a fixed deposit investment considering compound interest with different compounding frequencies.

3. Importance of Fixed Deposit Calculation

Details: Accurate fixed deposit calculation helps investors plan their savings, compare different investment options, and understand the potential returns on their investments over time.

4. Using the Calculator

Tips: Enter principal amount in dollars, interest rate as percentage, select interest payment frequency, and investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple interest and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does interest frequency affect returns?
A: More frequent compounding (e.g., monthly vs annually) results in higher returns due to the compounding effect.

Q3: Are fixed deposits risk-free?
A: Fixed deposits are generally considered low-risk investments, especially when offered by reputable financial institutions with deposit insurance.

Q4: Can I withdraw my fixed deposit early?
A: Early withdrawal may be possible but usually incurs penalties and may result in reduced interest earnings.

Q5: Are fixed deposit interest rates fixed for the entire term?
A: Yes, the interest rate is typically fixed for the entire duration of the deposit term once the investment is made.