When choosing a fixed deposit to invest in, one of the most important factors you must consider is the interest rate offered by the issuer. The interest rate is predetermined, and you can use it to calculate how much returns you would earn at the end of the tenor.
There are two main formulas that allow you to calculate the total interest receivable: simple interest and compound interest. Moreover, you can also use the ‘₹2 interest for ₹20,000 per month’ method to determine the interest receivable at the end of the investment horizon.
Also Check: Fixed Deposit
Just like the ‘₹1 interest’ method, you can use the ‘₹2 interest for ₹20,000’ method to find out your FD returns. In other words, if you earn ₹2 interest for ₹20,000 principal amount per month, you can use this method to find the total interest receivable:
Here is the table showcasing different formulas and illustrations to find your FD returns if the initial investment that you make is ₹20,000:
Calculation Method |
Formula |
Illustration |
‘₹2 Interest for ₹20,000 Per Month’ Method |
With ₹2 interest on ₹100, the annual interest rate would be 2 X 12 = 24% |
On investing ₹20,000 for monthly payouts at a 2% interest rate, your annual interest rate would be 24%. Monthly interest receivable = 20,000 X 2/100 = ₹400 |
Simple Interest Method |
I = p × r × t
Here,
|
Assume you invest the same amount for a tenor of two years. The interest earned in two years would be 10,000 X 24/100 X 2 = ₹4,800
Monthly interest = 4,800/12 = ₹400 |
Compound Interest Method |
I = [P (1 + r/n)^n X t] – P
Here,
|
If you invest ₹20,000 for the same length of tenor, compounding annually, the interest amount would be [20,000 X (1+24/100/1)^1*1] - 20,000 = ₹4,800
Monthly interest = 4,800/12 = ₹400 |
So, if you invest ₹20,000 as an initial investment in an FD providing ₹2 interest for two years, you can earn a monthly interest of ₹400. Alternatively, if you choose a compounding FD, your interest may be higher if it is compounded more than once yearly.
However, if you calculate FD interest manually, you may find the process complex and cumbersome. In addition to this, even a small manual error can cause huge variations in the end result.
Hence, it is advisable to use Bajaj Markets’s fd interest calculator to determine the amount of interest receivable. This online tool is not just quick but also easy to use. All you have to do is enter the principal amount, interest rate, and the tenor to determine your FD returns.
FAQs on How to Calculate ₹2 Interest for ₹20,000 Per Month
How to calculate FD interest using a simple interest formula if I earn ₹2 interest for ₹20,000 per month on it?
On an FD offering ₹2 interest for ₹20,000 at simple interest, you can calculate the total interest using this formula: I = p × r × t
How much interest can I earn on an FD with a tenor of 5 years compounding annually if I earn ₹2 interest for ₹20,000?
Here, the total interest receivable on such an FD would be ₹38,632.
What is the compound interest formula to compute FD interest if I earn ₹2 interest for ₹20,000 per month on it?
You can calculate compound interest on an FD offering ₹2 interest for ₹20,000 per month using this formula: I = [P (1 + r/n)^n X t] – P
What are the benefits of using an FD calculator?
Using an FD calculator can help you avoid any manual error in calculations. Additionally, it’s a time saving tool that provides you with accurate results.
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