1. What is the Compound Interest Formula?

The compound interest formula calculates the amount of interest earned on a fixed deposit where the interest is added to the principal at regular intervals, resulting in interest earning interest over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( P \) — Principal amount (LKR)
• \( R \) — Monthly interest rate (annual rate / 12, as a decimal)
• \( N \) — Number of compounding periods (months)
• \( A \) — Final amount (LKR)

Explanation: The formula accounts for the compounding effect where interest is earned on both the initial principal and the accumulated interest from previous periods.

3. Importance of FD Calculation

Details: Accurate FD calculation helps investors understand their potential returns, compare different investment options, and plan their finances effectively.

4. Using the Calculator

Tips: Enter principal amount in LKR, annual interest rate in percentage, and investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest.

Q2: How often is interest compounded in HDFC FDs?
A: HDFC Bank Sri Lanka typically compounds interest monthly, but you should confirm the compounding frequency for your specific FD.

Q3: Are FD interest rates fixed?
A: Yes, the interest rate is fixed for the entire tenure of the FD at the time of investment.

Q4: What is the minimum investment for HDFC FDs?
A: The minimum investment amount varies, but typically starts from LKR 10,000.

Q5: Are there tax implications on FD interest?
A: Yes, interest earned on FDs is generally taxable income in Sri Lanka.