Since there is a galore of investment options available in the market, individuals often incline towards low-risk and high interest-yielding options. Subsequently, to ensure they have opted for a suitable investment option, investors are often recommended to compare returns generated by different investment plans. Learn about how to Calculate Interest on Investments.
Regardless, to achieve it, they have to follow a cumbersome process of calculating the maturity value and interest accrued manually. It not only increases the risks of making errors but also complicates it. This is why it is recommended that investors use a reliable Google investment calculator to obtain accurate results and to arrive at the same quickly.
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For instance, these following offer a fair idea of manual calculations and use of formula –
For fixed deposit
Fixed deposits are safe and secure options that offer short-term and long-term investment plans. Additionally, the term deposit interest rates remain unaffected during volatile market situations and generate a steady income.
Consequently, to calculate interest, investors have to take into account their principal deposit, interest rate, compounding frequency and tenor.
Since computing, interest amount of fixed deposit is calculated using the compound interest formula – A = P x (1 + r/n) ^ t and I = A – P
In this formula,
- ‘A’ stands for maturity value.
- ‘P’ stands for the principal amount.
- ‘r’ stands for an interest rate.
- ‘t’ stands for tenor.
- ‘n’ stands for the frequency at which interest is compounded.
For example, if an individual deposits a sum of Rs.30,000 for a tenor of 2 years at a rate of 7.9% compounded annually, the maturity value would be –
A = P x (1 + r/n) ^ t
= Rs.34927
Therefore, interest would be –
I = A – P
= Rs.34927 – Rs.30000
= Rs.4927
Since the formula is complicated and involves several steps, investors prefer to use a fixed deposit calculator. Doing so, they are not only able to obtain accurate results immediately but also minimise the risk of making errors.
For Public Provident Fund
This investment option helps mobilise small savings and helps generate income on the same in the form of interest.
Likewise, the income is calculated using this formula – F = P [({(1+i)^n}-1)/i]
Where,
- ‘F’ is the amount at maturity.
- ‘P’ is the Instalments made annually.
- ‘n’ is the years of investment.
- ‘i’ is the interest rate.
For example, if an individual pays Rs.10,000 annually for a term of 15 years at a rate of 8%, the maturity amount would stand at –
F = 10,000 [({(1+8)^15}-1)/i]
= Rs.2,93,243
Therefore, interest would be the total principal amount minus the maturity amount. To eliminate the risk of making any errors, individuals can use a relevant Google investment calculator for PPF.
For recurring deposits
In this investment plan, individuals are required to deposit a fixed sum of the principal amount at regular intervals to generate interest on the same. This makes it one of the best investment options in India.
Like fixed deposits, a recurring deposit also uses the compound interest formula to calculate the income accrued on such investments.
An individual contributes Rs.1,000 into a recurring deposit for a tenor of 9 months and it generates returns at a rate of 5.75%. On maturity, the account would stand at –
A = 1000 x (1 + r/n) ^ t
= Rs.92,17
Therefore, the interest earned would be Rs. (9217-9000) = Rs.217.
Since the calculation is quite lengthy, it runs a greater risk of providing inaccurate results. This is why opting for a Google investment calculator is recommended to investors as it helps streamline the process effectively.
For instance, here are a few of the advantages of using a reliable investment calculator online –
- Helps calculate faster.
- Simplifies the process of calculating maturity value.
- Offers a fair idea of the interest amount.
- Eliminates the risk of error.
- Helps compare different investment options.
- Facilitates better financial planning.
Hence, it can be said that calculating interest on investment is a cumbersome process. It not only requires individuals to possess a fair idea of the formulas but also be aware of the prevailing interest rates. This makes the entire process quite time-consuming; therefore, using a Google investment calculator is a better alternative. Refer to top financers such as Bajaj Finance who offer not only attractive rates of interest of up to 8.05% but assured returns as well, rated CRISIL FAAA and ICRA MAAA guaranteeing minimal risks to the invested corpus.
