# How To Calculate Fixed Deposit Rate Of Any Bank In Nigeria

Calculating Fixed Deposit

The following is the formula for calculating fixed deposit with no compounding:

A = P(1 + rt)

Where:

A = final amount

P = deposit amount (initial investment)

r = annual nominal interest rate

t = number of years

The following is the formula for calculating fixed deposit with periodic compounding:

A = P × (1 + r/n)^{nt}

Where,

A = Final Amount that will be received

P = Principal Amount (i.e. initial investment)

r = Annual nominal interest rate (as a decimal i.e. if interest is paid at 3.5% pa, then it will be 0.035) (it should not be in percentage)

n = number of times the interest is compounded per year (i.e. for monthly compounding n will be 12, for half year compounding it will be 2 and for quarter it will be 4

t = number of years

[To arrive at the interest amount you can further use the formula Interest = A – P ]

Example: Let us assume that an amount of N500,000 is deposited in a bank for 4 years and paying an annual interest rate of 3.50%, compounded monthly.

Thus, the above formula values will be P = N500,000, r = 3.5/100 = 0.035, n = 12, and t = 4:

A = 500000 × (1 + 0.035/12)^{12×4}

So, the balance after 4 years is N575019.805 (or rounded to N575,020).

[To arrive at the interest amount = A – P = N575019.805 – N500,000 = N75019.805]

After that take away the 10% with holding tax which is N75019.805 – N7501.9805 = N67517.824.

The following is the formula for calculating fixed deposit with continuous compounding:

A = P × e^{rt}

Where:

A = final amount

P = deposit amount (initial investment)

r = annual nominal interest rate

t = number of years

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