How the FD Calculator works
A fixed deposit (also called a term deposit or CD) locks a lump sum with a bank or financial institution for a fixed tenure at a fixed interest rate. Because the rate and term are locked in, the maturity value can be computed exactly with the standard compound interest formula — there is no forecasting involved, only arithmetic.
The formula
For a deposit P, an annual interest rate r (as a decimal), a compounding frequency n (times per year), and a tenure t in years, the maturity amount is:
A = P × (1 + r/n)n×t
Total interest earned is simply A − P. The calculator also reports the effective annual yield (APY), which restates the nominal rate and compounding frequency as a single equivalent annual rate: APY = (1 + r/n)n − 1. APY is the number to use when comparing deposits that compound at different frequencies.
Worked example
Deposit $100,000 at a 7% annual rate for 5 years, compounded quarterly. The periodic rate is 0.07 / 4 = 0.0175 and there are 20 compounding periods (4 × 5). The formula gives a maturity amount of roughly $141,478 — about $41,478 of interest on the original $100,000. The effective annual yield works out to about 7.19%, slightly above the 7% nominal rate because interest compounds four times a year instead of once.
What moves the maturity value most
- Tenure: because interest compounds on interest, maturity value grows faster than linearly with time — doubling the tenure more than doubles the total interest earned.
- Interest rate: the rate has a compounding effect too; a 1-point rate increase matters more on a long tenure than a short one.
- Compounding frequency: moving from annual to monthly compounding raises the effective yield slightly above the nominal rate, since interest starts earning interest sooner. The gap widens a little as the rate rises but is usually well under half a percentage point.
Assumptions and limits
This calculator assumes the interest rate stays fixed for the entire tenure, no additional deposits or partial withdrawals occur, and interest is reinvested rather than paid out periodically. It does not account for tax withheld on interest, penalties for breaking the deposit before maturity, or promotional rates some institutions apply to specific tenures or depositor categories. Check your deposit's actual terms for those details before relying on the number for a real decision.