How To Calculate Fixed Deposit Rate Of Any Bank In Nigeria

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 × ert

Where:
A = final amount
P = deposit amount (initial investment)
r = annual nominal interest rate
t = number of years


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