# Why Should You Use FD Calculator While Planning Your FD Investments?

When it comes to safe investment alternatives, a fixed deposit investment tops the list. Both, banks and non-banking finance companies (NBFCs), offer this investment option. Being a stable form of investment with flexible tenure, it is suitable for all types of investors. A First-time investor may choose to invest in a fixed deposit for its stable returns. Seasoned investors invest in FDs to hedge the risks. This makes fixed deposit investments a must-have in your financial portfolio. However, selecting one with more or less similar fixed deposit interest rates can be confusing. There are myriad options to choose from and an FD calculator can help decide which is the right fit for you.

How does an FD calculator help in planning for your investment?

By the very nature of a fixed deposit, it pays out a predetermined amount on maturity and is independent of the fluctuations in the stock market. But calculating this amount on your own can be time-consuming. Here’s where this calculator can help determine your FD returns without having to worry about the complex underlying calculations. With a click of a button, you can know what will be the maturity amount of your investment for specified tenure at the available interest rate. Moreover, the FD calculator also helps to compare the available plans with different interest rates and compounding tenure. This way, it helps you to make an informed decision about investing in the right FD.

What is the formula to calculate your FD returns?

There are two types of calculations for your FD investment – simple interest and compound interest.

For calculating the simple interest, the formula is as follows-

A = P + (P * N * R/100)

Where,

A = the amount at maturity

P = principal amount of investment in fixed deposit

N = tenure of your FD investment

R = rate of interest

While it may appear easy to calculate simple interest, it is not the case with compound interest. Here is the formula for compound interest –

A = P + P {(1 + R/100) N -1}

For calculating compound interest, you also need to consider the compounding frequency of the interest on which further interest is earned.

How to use an FD calculator?

The first step is to determine the fixed deposit eligibility. Since almost everyone can invest in fixed deposits, it is a less stringent restriction. The next step is to accumulate all information that needs to be input in the FD calculator like FD rates, tenure and the principal amount. Once you add these details, click on submit button to view the amount that shall be received at maturity.

This is how with a couple of simple steps, you can make use of an FD calculator to determine your earnings from the FD investment.