Depositing funds into fixed deposit accounts (FDR) or recurring monthly deposit schemes (DPS) requires understanding how banks compound your profit. A simple annual percentage rate hides significant earnings differences depending on whether interest compounds annually, quarterly, or monthly over multi-year tenures.
Simple Interest vs. Compound Interest
The difference between linear growth and exponential wealth accumulation lies in compounding:
- Simple Interest: Interest is calculated strictly on the initial principal deposit. Formula:
Principal × Rate × Time. - Compound Interest: Interest earned in period one is added back to the principal, earning additional interest in period two (interest on interest). Formula:
Principal × (1 + r/n)^(n×t) - Principal. - Compounding Frequency: Monthly compounding delivers higher overall yields than annual compounding because interest begins accumulating gains earlier.
Calculate Compound Interest Returns Now
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Simple & Compound Modes • FDR & DPS Yields • 100% Free
Step-by-Step: How to Calculate Returns on ADF PDF
- Open our Interest Calculator tool.
- Enter your initial principal deposit amount.
- Type the annual interest rate percentage offered by the bank.
- Specify the investment duration in years or months.
- Select your compounding frequency (Monthly, Quarterly, or Annually).
- The calculator outputs your total accumulated maturity balance and net profit earned in real time.
Helpful Companion Financial Calculators
If taking a loan rather than investing savings, calculate your monthly bank installments using our Loan & EMI Calculator. To evaluate commercial ROI on business campaigns, use our Profit & ROI Calculator.