Most fixed deposits calculate interest using the simple interest formula: I = P × R × T. For a $25,000 deposit at 5.5% over 3 years, the interest is $25,000 × 0.055 × 3 = $4,125. Some FDs offer compound interest if you choose to reinvest the interest, but many pay out interest monthly or quarterly using simple interest calculations.

After 3 years at 5.5% simple interest, your $25,000 fixed deposit would have a maturity value of $29,125. This includes your original $25,000 principal plus $4,125 in earned interest. The maturity value is guaranteed as long as you hold the deposit for the full term without early withdrawal.

If you need regular income, choose a simple interest FD that pays out interest periodically to your account. If you want maximum growth and don't need the income, choose a compound interest option that reinvests your interest. Over 3 years at 5.5%, compound interest would earn approximately $440 more than simple interest on $25,000.