How this number is made
A term deposit, fixed deposit, or certificate of deposit pays a quoted annual rate, compounded on a schedule. Quarterly compounding, which many banks use, pays a little more than the same rate compounded once a year. The gap is the effective annual rate.
- Use the nominal rate on the receipt, the one that is not already labeled “effective” or “APY.”
- Match the compounding line. Quarterly is four times a year. “Annual” is once.
- This is money you do not touch. A deposit you add to every month belongs on the compound-interest page.
Formula
Maturity = principal × (1 + rate ÷ n) ^ (n × years). Effective annual rate = (1 + rate ÷ n) ^ n − 1.
Worked example
₹100,000 at 6% compounded quarterly for 5 years matures at about ₹134,686. The interest is about ₹34,686. The effective annual rate is a little above 6% because the interest itself earns interest inside the year.
Questions
Why is this not the compound-interest calculator?
That page assumes you add money every month and compounds monthly. A term deposit is one amount, locked, on the bank’s compounding schedule. Using the wrong one mis-states both the contributions and the frequency.
Is the interest taxed?
Often yes, either as you earn it or when it is paid. This maturity figure is before that tax. A lower rate is a rough way to look at an after-tax result.