A Fixed Deposit account, or alternatively a Time Deposit account, is an account that guarantees a fixed rate of return for an associated fixed time period. You deposit your money for a fixed time period ranging from 1 month to 36 months and you are guaranteed a certain rate of interest which is paid to you at the end of the fixed deposit term. Let’s take a look at how to calculate fixed deposit interest given the interest rate:
Calculation of fixed deposit interest
In Singapore fixed deposit is calculated on a simple interest basis. The formula used for simple interest calculation is R = PrT. Here “R” represents the return on interest, “P” stands for the principal or the amount placed in the fixed deposit, “r” represents the rate of interest which is usually calculated in “per annum”terms, i.e. interest rate per year and “T” represents the time period for which the deposit is hed. “T” can be in months or years.
Illustrative calculation: Let’s assume that you are placing $10,000 in a fixed deposit for a period of 6 months at an interest of 0.95% per annum. The calculation will be as follows:
R = (10000*0.5*0.95) / 100. Since the deposit term is 6 months (or half a year) it is converted to years and shown as 0.5. Your deposit will earn an interest of $47.50. Your return at the end of six months will be 10,047.50.
Calculate fixed deposit interest using Excel
Enter the deposit amount in Cell C1. Enter the period in months in Cell C2. Enter the interest rate in numbers (without the % at the end) in Cell C3. Enter the following formula in Cell C4 to calculate the interest earned on your deposit:
==C1*(C3/12)*(C2/100)
The interest earned on your deposit will be shown in Cell C4. If you wish to know the total return earned enter the following calculation in Cell C5:
=C1+C4
Calculate fixed deposit using online calculators
You can also calculate the return from your fixed deposit using online interest calculators. You will need to enter the deposit amount, the time period of the deposit and the interest rate. You can easily find the interest rate for a particular time period on the website of the bank where you choose to make the fixed deposit. Please note that interest rates may also vary with respect to the amount being deposited.
You will also be presented with a choice for the compounding option. Since all fixed deposits in Singapore are calculated using simple interest, choose the option, Zero Compounding / No Compounding or Simple Interest. The return on the deposit will be instantly displayed.
Fixed deposit interest in case of premature withdrawals
The general industry standard in cases of premature withdrawal is to pay interest based on the completed quarters of a calendar year. If the completed period of deposit is shorter than 3 months interest is not paid. This may vary from bank to bank. It is best to check with the bank, even before you make the deposit, as to how they will treat withdrawals before the deposit period is completed.
