Fixed Deposits Explained: How Quarterly Compounding Works
Fixed deposits are a simple way to earn a known return on money you do not need right away. Here is how the maturity value is worked out.
What is the Fixed Deposit Calculator?
This calculator estimates a fixed deposit that is locked in for a set term. It uses quarterly compounding, so interest is added four times a year: maturity = principal times (1 + r/4) raised to the power of 4 times t, where r is the annual rate and t is the term in years. The interest earned is the maturity value minus the original deposit.
How to use it
- Enter the amount you will deposit.
- Enter the annual interest rate and the term in years.
- Press Calculate to see the maturity value and the interest earned.
Worked example
Deposit 100,000 at 6% per year for 5 years. The tool gives a maturity value of 134,685.50 and interest of 34,685.50.
How is a fixed deposit maturity value calculated?
Divide the annual rate by four to get the quarterly rate, then compound it over four times the number of years. Multiply the original deposit by that growth factor to get the maturity value. The interest is simply the maturity value minus the amount you deposited.
Frequently asked questions
What does quarterly compounding mean?
It means interest is calculated and added to your balance every three months, so later interest is earned on a slightly larger balance.
Can I withdraw early?
Most fixed deposits charge a penalty for early withdrawal, and the rate may change. This calculator assumes the deposit runs for the full term.