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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

    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

    • HDFC MCLR rate cut by 5bps

      After revising fixed deposit rates, HDFC has also slashed MCLR rate, expanded as the Marginal Cost of Lending. The rate was reduced by 5 basis points.

      According to a representative from the bank, the MCLR rate for one year tenure is 8.1% and the rate for 6 months is 7.9%. These changes will be effective from November 7, 2017. This rate reduction will be applicable for all tenures.

      9th November 2017

    • RBI benchmark rate against dollar is 64.8064

      The Reserve Bank of India (RBI) has set the reference rate for the rupee at 64.8064. This rate has been set against the US dollar.

      The reference rate against the Euro for the Indian rupee is 75.2273. For the pound, the rate is 85.3371 and for the yen the rate set is 56.85 per 100 yen.

      This rate has been decided after comparing dollar rates and other cross currency quotes.

      The Special Drawing Rates for Indian currency will be determined based on this reference rate set by the RBI.

      7th November 2017

    • GST on common goods may be cut

      Tax rates are likely to be slashed on certain common use items such as shampoo, soap, plastic products, handmade furniture and the like. The Goods and Services Tax (GST) Council is mulling over considering slashing the 28% GST on various items.

      A decision is likely to be made to benefit both business and consumers with regard to products that fall under the 28% tax bracket. There are many plastic goods that fall under the 18% bracket, while other products fall under the 28% tax bracket.

      The GST Council has rationalised rates for as many as 100 items in the recent past.

      5th November 2017

    • Now, cheaper loans from SBI

      The State Bank of India (SBI) is now offering cheaper loans in the home and auto sector. This move is part of the rate revision strategy and the same is likely to be implemented by other banks in the near future.

      The bank claims that this is the lowest rates offered in the industry. At present home loans are being offered at the rate of 8.3%, compared to the earlier 8.35%. On the car loan front, the interest rate has been reduced to 8.7% from 8.75%.

      SBI has also slashed the interest rate offered on fixed deposits.

      3rd November 2017

    • Despite lowering FD rates, small finance banks offer higher interest

      Many small finance banks that were luring customers with a high interest rate that went up to over 9%, are now under pressure to cut down their interest rates on term deposits.

      It is important to note here that though these banks may cut down their interest rates, the rate of return offered will still be much higher when compared to other banks in the industry. The rate of interest offered by these banks is around 50 to 100 basis points higher than industry rates.

      Some of the small finance banks include Suryoday, ESAF, Fincare Small Finance, Capital Local Area Bank, etc. Suryoday Small Finance Bank was offering an interest rate of 8.75% for deposits held for 2 years to 3 years.

      2nd November 2017

    • Repo rate and RBI? Yes or No?

      There is still a cloud of confusion whether Repo rate will be changed in December, this year. A member of the Monetary Policy Committee (MPC) has urged that the Reserve Bank of India (RBI) to be mentally prepared to deal with the various drivers of inflation in the Indian economy.

      There has been talks about pushing the manufacturing sector. The fall in the growth of investments could be because of the slump in household investment in dwellings.

      If inflation touches us, it could lead to a lot of dangers. This may be likely due to the fall in fiscal deficit.

      23rd October 2017

    • 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
      "Great banking service"
      0.5 5.0/5 "Blown Away!"
      Totally I have 3 Fixed Deposit accounts with ICICI Bank. I am surprised where I can close my account by using online service. The interest rate was almost same like other public sector banks. No tax benefits, which are regular once here. I got a bonus points and very much happy with ICICI Service.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 18, 2017
    • SBI Fixed Deposit
      "Good service"
      0.5 4.0/5 "Great!"
      As I'm a long time customer with State bank of India for around 12 years and as I liked their banking services so I started a fixed deposit with State bank of India few years ago for 6 years as a tenure. I pay Rs. 10000 annually and I get 1 lakh at the end of the term.
      Was this review helpful? 0
      , faridabad
      Reviewed on Nov 18, 2017
    • SBI Fixed Deposit
      "Good service"
      0.5 4.0/5 "Great!"
      As I have a savings account with State Bank of India I started a fixed deposit account with them. But I'm really not sure about the interest rates they provide me but it's good for both my FD accounts in this State bank of India as well as the other bank IOC.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 17, 2017
    • Axis Bank Fixed Deposit
      "Good service"
      0.5 4.0/5 "Great!"
      Even though I don't like the saving account with Axis bank as there is a minimum balance of Rs. 10000 has to be maintained I like the fixed deposit account with Axis bank as that process is simple and smooth and I have it for 2.5 years and also they pay good interests rates of 7.5%.
      Was this review helpful? 0
      , faridabad
      Reviewed on Nov 17, 2017
    • Axis Bank Fixed Deposit
      "Best"
      0.5 5.0/5 "Blown Away!"
      I am using Axis FD service for last 15 years. The amount differs for a fixed deposit. The interest rate was vey high than other nationalized banks. They providing more benefits to the customers. There is no issues with Axis and am completely satisfied with the service. The most interesting feature is they auto renew the policy or they pay extra charges for late 15 days.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 16, 2017
    • SBI Fixed Deposit
      "Average account to use"
      0.5 3.0/5 "Satisfactory"
      The rate of interest which I got from SBI Fixed deposit was good and I got the amount on time. The rate of interest was 9% when I got the fixed deposit from State bank at present it got reduced because the RBI new Scheme. The customer support need to be improved with SBI. I would say it is trusty worthy to have an FD account with SBI.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 16, 2017
    • SBI Fixed Deposit
      "Excellent in service , hike in interest rate"
      0.5 4.0/5 "Great!"
      I have invested in fixed deposit with the State bank of India, also the interest rate is depends for the fluctuation of market sector. I would like to say that the investments are really transparent with them, also I dont have any issues on it.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 16, 2017
    • SBI Fixed Deposit
      "Fixed deposit"
      0.5 4.0/5 "Great!"
      SBI Fixed Deposit is the first thing that I would look out for, we can book the FD online, I even get the FD bond online it is created automatically too . They provide the best rate in the industry . Further more , we get the options to change the maturity instructions online too. Not sure about the tax benefit. When I placed a request for liquidation, I got my funds back immediately and this FD was opened a couple of years back.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 14, 2017
    • SBI Fixed Deposit
      "Average"
      0.5 3.0/5 "Satisfactory"
      I am having the fixed deposit account with the State bank of India and I would like to say that they are average one . I would like to say that everything could not be up to the mark. Online services are really good one with the State bank of India.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 14, 2017
    • andhra Bank Fixed Deposit
      "Good"
      0.5 4.0/5 "Great!"
      From the Andhra bank, I am holding the fixed deposit account from the last three years of time. I would like to say that the response could be get improvised, also there are no worries on it. Its the typical government bank.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Nov 14, 2017
    • ICICI Bank Fixed Deposit
      "Good"
      0.5 4.0/5 "Great!"
      I am holding the fixed deposit account with the ICICI bank from the last five years of time. I would like to say that the response is also good one and everything is up to the mark. I am really happy with the ICICI bank fixed deposit.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Nov 14, 2017
    • HDFC Bank Fixed Deposit
      "Good"
      0.5 4.0/5 "Great!"
      I am having the fixed deposit account with the HDFC bank and am holding it from the last five years of time. I would like to say that the rate of interest was reduced around up to 7.5% as cumulative one, which is an average one.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Nov 14, 2017
    • andhra Bank Fixed Deposit
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      I hold a Fixed deposit account with Andhra Bank and the banking process is really nice. The bank is very supportive and very beneficial too. I get a good rate of interest on this account and there are no charges related to this account. Overall no issues.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 13, 2017
    • review Fixed Deposit
      "Not too good on the rate"
      0.5 2.5/5 "Just OK"
      I have a fixed deposit with City union bank and the interest that they have for it is not a reasonable rate and i feel that they should be providing a better rate for it. The service was however good at the time of the account being open and the response received was good.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 11, 2017
    • SBI Fixed Deposit
      "Great experience"
      0.5 5.0/5 "Blown Away!"
      Liquidation is quite interesting with SBI because as soon as i placed a request for breaking my FD, in the next 2 minutes funds were sent to my account on time and it was simple too. Online I had a placed for the BREAKNG FD and foreclosure charges were very meager as they hardly charged rs 150 as the charge.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 10, 2017
    • HDFC Bank Fixed Deposit
      "Fixed deposit"
      0.5 5.0/5 "Blown Away!"
      HDFC Fixed Deposit is good, as every one can invest in FD the interest rate at that time was 6.5% for a short tenure. I am pretty sure for the long tenure they will provide tax benefits. I had placed a request for this FD through online through my account i can view my maturity information online. I remember placing a request for change of nominee online once.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 10, 2017
    • SBI Fixed Deposit
      "Not satisfied"
      0.5 2.5/5 "Just OK"
      I have a fixed deposit with State Bank Of India and i would definitely say that the experience has not been satisfactory. Being a government bank i feel that they are not focused on improvement and the service is not up to the mark. Their banking work is always delayed.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 09, 2017
    • Post Office Fixed Deposit
      "Good returns"
      0.5 4.5/5 "Excellent!"
      I had a Fixed Deposit with Post Office a few time back, and found the return to be pretty satisfying. I found the overall experience with them to be pretty good and didn't face any issue at all. I found this account to be good return for the investment I made.
      Was this review helpful? 0
      , bhubaneshwar
      Reviewed on Nov 08, 2017
    • DHFL Fixed Deposit
      "Good FD to have"
      0.5 3.0/5 "Satisfactory"
      I have a Fixed Deposit account with DHFL and felt the experience to be pretty good. I am expecting a very good return for the money I am investing in. I heard they have one of the best interest rate in the market. Overall the experience with them is good.
      Was this review helpful? 0
      , motihari
      Reviewed on Nov 07, 2017
    • SBI Fixed Deposit
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      As I have a savings account with State Bank of India which is being maintained for the last 4 years, I also started a fixed deposit account with State Bank of India. Their services are good and no problems with them so far and they are providing 8% to 10% as interest for the fixed deposit.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 07, 2017
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