Fixed deposits are fixed-income saving schemes. You choose the amount you want to deposit and the tenure, and depending on these factors, the fixed deposit interest rateis determined.
When you know the fixed deposit yield interest rate, you can plan for your financial goals effectively. Therefore, when you make a deposit, it is advisable to calculate the interest so that you know the corpus that you can accumulate.
But how do you do that?
It is simple. There is a formula for calculating the interest that you can earn.
But before we look at the formula, you should know that there are two types of interest calculations on fixed deposit schemes. Let us see them.
Under the simple interest mode of interest calculation, you receive a flat interest rate on the amount you deposit. So, if you deposit Rs. 100 and the interest rate is 6%, you would earn an interest of Rs. 6 every year.
Under the compound interest mode of calculation, interest is calculated each year on the corpus accumulated at the end of the last year. As a result, you earn interest not only on the deposited amount but also on the interest already added previously.
Are you confused?
Let us simplify.
In the above example, after the first year, you would earn an interest of Rs. 6 on the deposit of Rs. 100. However, in the second year, the interest would be calculated on Rs. 106, i.e., Rs. 100, which you deposited, and the interest of Rs. 6 that you earned last year. So, in the second year, the interest payable would be Rs. 6.36. Similarly, in the third year, you will calculate the interest on the total amount of Rs.106 + Rs.6.36, i.e., Rs.112.36.
Now that you know the two types of interest calculations, here is a look at the formula for each:
In the above formulae, the values used are as follows:
Let us understand with the help of a good example:
Say you deposit Rs. 50,000 in a fixed deposit scheme which pays an interest of 8% per annum for a term of 5 years. In this case, you can calculate the yield from the plan under both simple and compound interest as follows:
While the formulae are pretty simple, and you can work them out to find the fixed deposit yield interest rate, it is a technical calculation. As such, fixed deposit calculators are available, which help you calculate the potential interest with accuracy and ease.
The fixed deposit calculator is an online tool wherein you just need to enter the amount you are depositing, the tenure of deposit, and the interest rate. The calculator then estimates the interest you can earn on the deposit and the amount payable on the maturity. You can also change the deposit amount and/or the tenure as per your needs to find how the interest earnings would change.
A fixed deposit calculator is a beneficial tool because:
Fixed deposits give you guaranteed returns and are immune to volatility risks. While you can find the best fixed deposit yield interest rates, here are some aspects that you should keep in mind.
Many fixed deposit schemes allow you to choose the interest payment frequency from the monthly, quarterly, half-yearly, or annual mode.
Shriram City Union Finance offers attractive fixed deposit schemes that are rated MAA+ by ICRA. Therefore, you rest assured about the security of your deposit. You can avail of 12 to 60 months tenure. Moreover, the Shriram City fixed deposit yield interest rate starts from 7.75%, and we offer senior citizens an additional 0.30% interest.
You can use the Shriram City fixed deposit calculator to find out the maturity corpus. Just enter in the deposit amount and the tenure. The calculator would calculate the interest payable as well as the maturity amount.
Choose from cumulative and non-cumulative schemes depending on your financial goals and build your portfolio. So, understand how to calculate fixed deposit yield interest rates and use the calculators to determine what your savings would be worth.
Invest in Shriram City fixed deposits for attractive returns and choose from the company's flexible schemes.