The formula used to calculate the interest depends on whether the interest is simple or compounded.

Simple Interest

For simple interest, the formula is:

Interest=P×R×T100\text{Interest} = \frac{P \times R \times T}{100}Interest=100P×R×T​

Compound Interest

For compound interest, the interest can be calculated using the formula:

A=P(1+Rn×100)n×T\text{A} = P \left(1 + \frac{R}{n \times 100}ight)^{n \times T}A=P(1+n×100R​)n×T

Where:

• A = Maturity amount (Principal + Interest)
• n = Number of times interest is compounded per year

The interest earned is then:

Interest=A−P\text{Interest} = A - PInterest=A−P

FD Calculator Example

Let's use an FD calculator to understand the process better. Suppose you have deposited ₹10,000 at an annual interest rate of 5% for 3 years. The bank compounds the interest annually.

Principal (P): ₹10,000
Rate of Interest (R): 5% per annum
Time (T): 3 years
Compounding Frequency (n): 1 (annually)

Using the FD calculator formula for compound interest:

A=10000(1+51×100)1×3A = 10000 \left(1 + \frac{5}{1 \times 100}ight)^{1 \times 3}A=10000(1+1×1005​)1×3

A=10000(1+0.05)3A = 10000 \left(1 + 0.05ight)^3A=10000(1+0.05)3

A=10000×1.157625=₹11576.25A = 10000 \times 1.157625 = ₹11576.25A=10000×1.157625=₹11576.25

The interest earned would be:

Interest=A−P=11576.25−10000=₹1576.25\text{Interest} = A - P = 11576.25 - 10000 = ₹1576.25Interest=A−P=11576.25−10000=₹1576.25

So, the FD calculator helps us determine that the interest earned on the FD would be ₹1576.25 over 3 years with annual compounding.