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Nairaland Forum / Nairaland / General / Business / How To Calculate Fixed Deposit Rate Of Any Bank In Nigeria (9883 Views)
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How To Calculate Fixed Deposit Rate Of Any Bank In Nigeria by anisalome(m): 3:32pm On Feb 07, 2016 |
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 source: http://www.talkasset.com/how-to-calculate-fixed-deposit-rate-of-any-bank-in-nigeria/ 2 Likes |
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