suppose my present value of cash is 2,22,051 and its future value is calculated by using the formula FV=PV(1+r)^n with r=8 and n=3.So future value is 12,95,001.432

Now if I go to fixed deposit calculator and tried calculating future value of present cash 2,22,051 with interest 8.5% and period of 36 months then it is 285,783.77.

so why there is huge difference between these two?

closed as unclear what you're asking by Chris W. Rea, JoeTaxpayer, JohnFx, John Bensin, Dheer Apr 1 '14 at 3:47

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    fixed deposit calculator Which calculator are you talking about ?? Did you use r as 0.08 or used 8 ?? Compunding for 36 months is very different from compounding for 3 years. You calculate interest on interest earned for 36 months. – DumbCoder Mar 31 '14 at 11:01

In the first calculation you cite, $222,051.00 grows to $1,295,001.432 in three years. Take the ratio of end to start, take the cube root, and you get 1.8. You did the first calculation using an interest rate of 80%

That should explain the large difference in results


In the second calculation you cite, if one assumes that the interest rate is 8.5% per year nominal interest rate, compounded quarterly, the future value of $222,051.00 is $285,783.77, exactly the result you found.

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