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    We found 112 Compound Interest Formula
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    Deposit Amount Range
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    Up to ₹25L
    1 Year to 5 Years
    7.49% - 8.19% Monthly compounding
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    Up to ₹25L
    1 Year to 5 Years
    7.75% - 8.5% Monthly compounding
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    Up to ₹1Cr
    7 Days to 20 Years
    5% - 7.8% Quarterly compounding
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    Up to ₹1Cr
    7 Days to 10 Years
    4% - 7.25% Quarterly compounding
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    Up to ₹1Cr
    7 Days to 10 Years
    4.25% - 7.05% Monthly compounding
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    Up to ₹1Cr
    15 Days to 20 Years
    4.25% - 7.25% Monthly compounding
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    Up to ₹1Cr
    7 Days to 10 Years
    4% - 7% Monthly compounding
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    NRI - FD
    Up to ₹1Cr
    1 Year to 5 Years
    6.5% - 6.8% Monthly compounding
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    NRI - FD
    Up to ₹1Cr
    1 Year to 10 Years
    6% - 6.75% Monthly compounding
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    NRI - FD
    Up to ₹1Cr
    1 Year onwards
    6.25% - 6.5% Monthly compounding
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    Up to ₹1Cr
    7 Days to 10 Years
    4% - 7.30% Quarterly compounding
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    NRI - FD
    Up to ₹1Cr
    1 Year to 5 Years
    6.80% Quarterly compounding
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  • Compound Interest Formula is Rated as "Excellent!" by 1801 Users

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    Compound Interest Formula

    Compound Interest Overview

    Gone are the days of school mathematics, most of us easily forget, but a quick refresher may bring it all back. To understand compound interest in the easiest form, let’s take a look at what it means. Compound interest is a useful financial concept in which your interest earned is added to your principal. This amount then continues to earn more interest. So in this case, you also earn interest on the interest you’ve already earned. So your balance grows at an increasing rate. In a sense, you reinvest your interest, rather than receiving a pay-out.

    • Year 1 - You earn interest on your Principal.
    • Year 2 - You earn interest on your (Principal + Interest of Year 1).
    • Year 3 - You earn interest on your (Principal + Interest of Year 1 + Interest of Year 2).

    Compound interest is the basis of long-term growth of the stock market. It forms the basis of personal savings plans. Compound interest also affects inflation.

    Types of Compound Interest

    There are generally two types of compound interest used.

    • Periodic Compounding - Under this method, the interest rate is applied at intervals and generated. This interest is added to the principal. Periods here would mean annually, bi-annually, monthly, or weekly.
    • Continuous Compounding - This method uses a natural log-based formula and calculates interest at the smallest possible interval. This interest is added back to the principal. This can be equalled to the constant rate of growth for all natural growth. This figure was born out of physics. It uses Euler’s number which is a famous irrational number which is known to more than 1 trillion digits of accuracy. Euler’s number is denominated by the letter “E”.

    Periodic Compound Interest Formula Overview

    There are two formulas you can use to calculate compound interest, depending on what result you wish to find out. You can find out the following:

    • The total value of the deposit.
    • The total compound interest earned.

    Value of the Deposit

    Formulas can be a deterrent to many. If you aren’t savvy with math, your eyes turn away from these codes or just skip them altogether. But once it’s explained, it’s pretty simple to understand. To calculate the total value of your deposit, the formula is as follows:

    P (1+ i/n)nt

    P = Principal invested.

    i = Nominal Rate of Interest.

    n = Compounding Frequency or number of compounding periods in a year.

    t = Time, meaning the length of time the interest is applicable, generally in years.

    Simply put, you calculate the interest rate divided by the number of times in a year the compound interest is generated. For instance, if your bank compounds interest quarterly, there are 4 quarters in a year, so n = 4. This result must be multiplied to the power of the deposit period. For example, if your deposit is for 10 years, t = 10. This whole result should be multiplied by the principal you invested. The result generated will equal the total accumulated value of your deposit. You can find out how much your deposit is worth currently after accumulating interest.

    Total Compound Interest Earned

    To find out how much interest was earned, you can use the following formula for Compound Interest.

    P[(1+ i/n))nt-1]

    Compound Interest Equation and Calculation

    To understand the compound interest equation further, we can break it down in simpler terms. If you decide to invest in a fixed deposit with compound interest, this is how you will earn interest every year.

    Period Deposit Balance
    Investment P
    Year 1 P + iP
    Year 2 (P+ iP) + i(P+iP)

    To collapse this formula, we can pull out factors of (1+i). Simply substitute iP with (1+i) to get the following:

    Period Deposit Balance
    Investment P
    Year 1 P(1+i)
    Year 2 P(1+i)2
    Year 3 P(1+i)3

    Formula for Annual Compound Interest

    To calculate the compound interest for a number of years together, we need to multiply P(1+i) to the power of the number of years of the deposit. So we end up with this formula:

    P (1+ i/n)n

    This formula can be used to calculate compound interest that is compounded annually. This means you receive interest only once a year. It is added to your principal, and you continue to earn interest on the new amount.

    Half-Yearly, Quarterly, Monthly Compound Interest Formula

    If you are earning interest multiple times in a year, you need to factor in this number into the equation. So the formula generated is:

    P (1+ i/n)nt

    This formula can also be used for instances where the interest is compounded once every two years. In this case, n = 0.5, as each year is calculated as half.

    Examples of Compound Interest

    For example, Rs. 10,000 is invested in a fixed deposit for 10 years. The interest is compounded every quarter which means 4 times in a year. The interest paid by the bank is 5%. To find out your nominal rate of interest, you need to divide 5 by 100 which equals 0.05. Now, we look at the formula and substitute the letters with the relevant numbers.

    Calculating the Total Value of the Deposit

    P (1+ i/n)nt

    Step 1: 10,000 (1+0.05/4)4x10

    Step 2: 10,000(1+0.0125)40

    Step 3: 10,000 (1.0125)40

    Step 4: 10,000 (1.64361946349)

    Step 5: 16436.1946349

    We can round of this total to Rs. 16,436.19. So the compound interest earned after 10 years is Rs. 6,436.19.

    Calculating the Interest Earned

    We can also arrive at this figure using the formula for compound interest earned. We can substitute the numbers for letters as seen below:

    P[(1+ i/n)nt -1]

    Step 1: 10,000 [(1+0.05/4)4x10 -1]

    Step 2: 10,000 [(1+0.0125)40-1]

    Step 3: 10,000 [(1.0125)40-1]

    Step 4: 10,000 [(1.64361946349) -1]

    Step 5: 10,000 (0.664361946349

    Step 5: 6436.1946349

    We can now add this interest earned to the principal amount to find out the value of the deposit. The maturity value will be Rs. 16,436.19.

    The earnings through compound interest can be demonstrated with the following graph.

    FD Compund Interest

    Simple Interest vs. Compound Interest

    To demonstrate the difference between simple interest and compound interest, let’s take for example two fixed deposits. Both deposits are of Rs. 10,000 for 10 years. The interest offered on Deposit 1 is 5% compound interest. The interest offered on Deposit 2 is 5% simple interest. The interest is calculated annually on both deposits.

    Period Deposit 1 - Compound Interest Deposit 2 - Simple Interest Difference
    Year 1 Rs. 500 Rs. 500 Rs. 0
    Year 2 Rs. 1,025.00 Rs. 1,000 Rs. 25
    Year 3 Rs. 1,576.25 Rs. 1,500 Rs. 76.25
    Year 4 Rs. 2,115.06 Rs. 2,000 Rs. 115.06
    Year 5 Rs. 2,762.82 Rs. 2,500 Rs. 762.82
    Year 6 Rs. 3,400.96 Rs. 3,000 Rs. 400.96
    Year 7 Rs. 4,071.00 Rs. 3,500 Rs. 571.00
    Year 8 Rs. 4,774.55 Rs. 4,000 Rs. 774.55
    Year 9 Rs. 5,513.28 Rs. 4,500 Rs. 1,013.28
    Year 10 Rs. 6,288.95 Rs. 5,000 Rs. 1,288.95
    FD Comparison

    From the graph above, we can see clearly the higher earnings through compound interest compared to simple interest. The difference is not too much upto the 4th year. This is because the interest accumulated over the years is added to the principal, thus making the principal significantly higher. From Year 5, there is a major difference in the interest earned. At the end of 10 years, Deposit 1 earns Rs. 6,288.95, while Deposit 2 earns Rs. 5,000. The difference between the two is Rs. 1,288.95.

    Compound Interest with Monthly Contributions

    Compounding interest on fixed deposits where you are allowed to make monthly contributions can get a little tricky. For the amount invested during the compounding period, interest will be generated for the initial investment amount + monthly contributions. These deposits are rare but are an extremely good investment with whopping returns.

    For example, Rs. 10,000 is the initial fixed deposit amount. The investor deposits Rs. 1,000 every month for 5 years. If the interest is compounded annually, then the interest will be as follows:

    Period Investment Breakdown Investment + Interest Accumulated Interest Earned Total Value of Deposit
    Year 1 10,000 + 12,000 22,000 1,100 23,100
    Year 2 10000 + (12000 x 2) + 1,100 35,100 1,755 36,855
    Year 3 10000 + (12000 x 3) + (1,100 +1,755) 48,855 2,442.75 51,297.75
    Year 4 10000 + (12000 x 4) + (1,100 +1,755 + 2,442.75 ) 63.297.75 3164.87 66,462.64
    Year 5 10000 + (12000 x 5) + (1,100 +1,755 + 2,442.75 + 3164.87 ) 78,461.75 3,923.13 82,385.77

    Through this table, we can see that the interest earned is accumulated every year and added to the principal amount. The total money contributed by the investor is Rs. 10,000 initially, followed by Rs. 1,000 every month or Rs. 12,000 every year. The investor made a total contribution of Rs. 10,000 + Rs. 60,000. At the end of 5 years, the value of his deposit is Rs. 82,385.77. The total compound interest earned is Rs. 12,385.77.

    The Benefit of Compound Interest

    Compound interest is your biggest friend when it comes to deposits and investments. Working in favor of investments, you stand to gain much more from the interest payable. But compound interest will be your worst enemy when it is calculated on your loan or other debt. You will end up paying significantly more interest on your loan. In terms of fixed deposits, compound interest is a great way of earning more on your investment. You earn much higher returns with compound interest on long term deposits. Compounding interest monthly, quarterly and half-yearly can spike your interest even higher. The benefits of compound interest can be listed as follows:

    • Reinvestment - The interest earned will be reinvested into the same deposit.
    • Higher value of the deposit - Compound interest leads to a higher value of the deposit. Upon maturity, your deposit will be more than a deposit with simple interest.
    • Long-term savings - Compound interest deposits encourage long-term savings as the return on investment is much higher after 10 years or more.
    • Increased Earnings - Options of compounding monthly, quarterly, and half-yearly increase the interest earned.

    Financial platforms where compound interest is applicable

    Compound interest is used for both debit and credit aspects of the financial world. Listed below are some of the investments and credit options that use compound interest.

    Investments

    • Savings Accounts
    • Fixed Deposits
    • Recurring Deposits
    • Other Certificates of Deposits
    • Reinvested Dividend Stocks
    • Retirement Funds

    Debt

    • Loans
    • Credit Cards
    • Mortgages

    When it is used in case of deposits and investments, we stand to benefit. On the other hand, when compound interest is charged on loans and debt, the banks and lenders stand to gain.

    News Related to Compound Interest Formula

    • SC/ST and OBC Students’ Education Loans To Be Guaranteed By Govt

      The Jharkhand government will be guaranteeing the education loans of students from SC/ST and OBC categories from the following academic year.

      Eligible students who apply for an education loan will be guaranteed by the government for a sum of over Rs.7.5 lakh, thus enabling them to pursue higher education. The guarantee will be provided under the Jharkhand Education Loan Guarantee Scheme, which can be accessed online.

      Courses at all state and central universities as well as NIT, AIIMS and IIT’s will be eligible for the education loans.

      27th March 2017

    Compound Interest Formula Reviews

    • ICICI Bank Fixed Deposit
      "Good "
      0.5 5.0/5 "Blown Away!"
      I have opened my fixed deposit with ICICI bank. There transaction is very fast with very helpful and user friendly application. I got a FD receipt. I never tried to foreclose the fixed deposit. I am happy with the service, No issue till now from ICICI.
      Was this review helpful? 0
      , chennai
      Reviewed on Oct 16, 2017
    • Bank of Baroda Fixed Deposit
      "More than satisfactory"
      0.5 5.0/5 "Blown Away!"
      I have a fixed deposit account with Bank of Baroda and the process to get this account done was easy. The customer services are good and the interest rate is also to my satisfaction. I have taken a loan recently on this account. It just took half an hour for the process for the loan.
      Was this review helpful? 0
      , dhanbad
      Reviewed on Oct 14, 2017
    • SBI Fixed Deposit
      "Good Service"
      0.5 4.0/5 "Great!"
      As I have been maintaining my savings account with State Bank of India for nearly 4 to 5 years I have also started a Fixed Deposit account with State Bank of India as I liked their services. I have deposited Rs. 20000 annually and they give 7 to 8 % as interests.
      Was this review helpful? 0
      , thane
      Reviewed on Oct 14, 2017
    • SBI Fixed Deposit
      "Easy process and good services"
      0.5 5.0/5 "Blown Away!"
      I have invested two lakhs at State Bank of India. It was a easy process to open this fixed deposit account. If I want to close the account, I can do so only after six months. I was not keen on checking on the interest rates, as I just wanted my money to be safe in the bank.
      Was this review helpful? 0
      , tirupati
      Reviewed on Oct 12, 2017
    • ICICI Bank Fixed Deposit
      "excellent service"
      0.5 5.0/5 "Blown Away!"
      I have opened my fixed deposit through online ,I never contacted any of their representatives. There transaction is very fast with very helpful and user friendly application ,overall service is excellent from ICICI. No issue till now from ICICI.
      Was this review helpful? 0
      , delhi
      Reviewed on Oct 07, 2017
    • SBI Fixed Deposit
      "Fixed with SBI"
      0.5 4.0/5 "Great!"
      SBI provides good service for the customers who are handing a fixed deposit with SBI.I have a good experience with SBI in the state of fixed deposit.The rate of interest is also seems very standard and well classified.It is actually a recommendable one for all who are planning for an FD.
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Oct 04, 2017
    • SBI Fixed Deposit
      "Average"
      0.5 3.0/5 "Satisfactory"
      I had the fixed deposit account with the State bank of India and the interest rate was around 7.5%. Customer service is also good one for me and their responsiveness too. Online banking services are good one for me with them.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Oct 03, 2017
    • Corporation Bank Fixed Deposit
      "average service"
      0.5 3.0/5 "Satisfactory"
      Service is very good ,response of their representatives was very good and responsible. They have some problem with their online application during the payments and other transactions are very slow with their application ,still overall service is good from CORPORATION bank.
      Was this review helpful? 0
      , bangalore
      Reviewed on Sep 30, 2017
    • HDFC Bank Fixed Deposit
      "FD account"
      0.5 5.0/5 "Blown Away!"
      HDFC FD is really good, I have got a competitive interest rate also everything is prefect here. I am not getting tax benefit, but I am holding this FD for a period of 2 to 3 months. No compliments were offered. I had placed a request for the FD online and the interest rate is 6.75%.
      Was this review helpful? 0
      , bangalore
      Reviewed on Sep 29, 2017
    • Post Office Fixed Deposit
      "Excellent"
      0.5 4.0/5 "Great!"
      I do have the Fixed deposit account with the India post office. Interest rate is more than bankers with them. I would like to say that the customer service is very average one and that has to be get improved more, also they need to work on it.
      Was this review helpful? 0
      , noida
      Reviewed on Sep 28, 2017
    • IndusInd Bank Fixed Deposit
      "Excellent"
      0.5 4.0/5 "Great!"
      I do have the Indusind bank fixed deposit account and within a day of time the account got opened. I would like to say that the response is good one for me with them and their customer service is also fine one with them.
      Was this review helpful? 0
      , noida
      Reviewed on Sep 28, 2017
    • ICICI Bank Fixed Deposit
      "GOOD "
      0.5 4.0/5 "Great!"
      For the fixed deposit in the kotak mahendra bank was real good experience it was and also the customer service was real good . I took a Fixed Deposit of rupees 20,000 i paid it only for one time . I took it for 4 years but i broke the FD for some personal reason . I like the over experience .
      Was this review helpful? 0
      , hyderabad
      Reviewed on Sep 28, 2017
    • SBI Fixed Deposit
      "FD account"
      0.5 5.0/5 "Blown Away!"
      I have had opened a FD were an executive came to my place, I had filled the FD FORM and signed it and my request was accepted.The reason for choosing SBI for FD was because SBI provides the best interest rate they provide perfect details about FD. I provided 2 photos and one cancelled cheque and adhaar card for opening this FD.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Sep 26, 2017
    • IndusInd Bank Fixed Deposit
      "Fixed depost"
      0.5 5.0/5 "Blown Away!"
      With INDUDIND, I am holding a NRE so based on which they offered a NRE rate. This was opened and closed. This request was placed online no challenges nor any issues. I did not get any tax benefit for this FD. It was opened on the basis of NRE....
      Was this review helpful? 0
      , thane
      Reviewed on Sep 23, 2017
    • SBI Fixed Deposit
      "My FD"
      0.5 4.0/5 "Great!"
      SBI FD is fine i am holding this SBI FD for about 6 years no drawback nor any Challenges. the rate of interest has come down i have started 9.25% but this year 6.5% flat. it is very easy to book FD online liquidation can be done through online option thee is an option to transfer the amount directly
      Was this review helpful? 0
      , kolkata
      Reviewed on Sep 21, 2017
    • Federal Bank Fixed Deposit
      "Nominal interest"
      0.5 4.0/5 "Great!"
      I have invested Rs.50,000 in Federal Bank FD account, it has the tenure of five years, they told they would provide 6.5% of interest for the fixed deposit account. It is not that much great. I am an existing customer of the bank, hence I opened FD with them.
      Was this review helpful? 0
      , bangalore
      Reviewed on Sep 20, 2017
    • HDFC Bank Fixed Deposit
      "Its Convenient"
      0.5 5.0/5 "Blown Away!"
      I have taken Fixed deposit from HDFC, I have invested Rs. 10 Lakhs for the tenure of one year, I went to the branch and opened the FD account, my relationship manager helped to open it within two days of time. They are providing 7.5% of interest of one year but I could withdrawal it anytime but some charges applicable.
      Was this review helpful? 0
      , bangalore
      Reviewed on Sep 20, 2017
    • HDFC Bank Fixed Deposit
      "Good for deposits "
      0.5 5.0/5 "Blown Away!"
      We can save and have fixed deposit with less rate of interest in HDFC bank they give benifiatials based on the amount that we deposit .We can with draw and the interest will be added with the minimal balance .I have been using this bank services for a longer time its good i with draw when i need with out any hassle .
      Was this review helpful? 0
      , gurgaon
      Reviewed on Sep 16, 2017
    • Lakshmi Vilas Bank Fixed Deposit
      "Good savings"
      0.5 5.0/5 "Blown Away!"
      I have invested Rs. 3 lakhs it has the tenure one year,I am holding Fixed deposit around Rs. 3 months. After maturity I well receive the interest of 8% and investment amount credits to my account, I am working as a staff in the same bank, hence they provides 8% as a staff for other they give 7% and for senior citizen 7.5% of interest.
      Was this review helpful? 0
      , rajapalayam
      Reviewed on Sep 13, 2017
    • SBI Fixed Deposit
      "Good investment"
      0.5 5.0/5 "Blown Away!"
      I have invested some amount in SBI fixed deposit, last year they gave me 7.5% of interest on it , its has the tenure of one year. Every year I used to go to the home branch to renew the FD, bank response is also quite good. But its not so beneficial, if I would have invest in mutual fund I would have got some extra benefits.
      Was this review helpful? 0
      , gwalior
      Reviewed on Sep 12, 2017
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