Recurring Deposit: It is important to understand the calculation of interest on RD as this will enable you to decide whether you are planning on financial basis or not.
Recurring Deposit Interest: After doing job, if you want to invest your money in a safe and better place, then Recurring Deposit can be a great option. If you want, you can open your RD account in the post office or any bank and start investing with Rs 100 in a month. The interest earned on recurring deposits is higher as compared to bank FDs and savings accounts. It is important to understand the calculation of interest on RD as this will enable you to decide whether you are planning on financial basis or not.
Calculation of Interest on RD
Let us tell you that there are different formulas for the calculation of interest on RD. If you invest on a monthly basis then it has a different formula and if you invest in lumpsum then it has a different formula.
On monthly investment
M = R [(1+i)n – 1] divided by 1-(1+i)(-1/3)
M: Maturity Value of
RD R: No. of Monthly Installment of RD
n: Tenure (Total Number of Quarterly)
I: Rate of Interest/400
Lump sum deposit
A = P (1 + r/n) ^ nt
A: Final amount
P: Total amount invested
r: Rate of interest
n: How many times interest compounded in a year
t: Total tenure of RD
Know these benefits before opening an RD account
- The interest on RD is added on the basis of compounding i.e. the more years you invest, the more profit will be.
- Before opening an account, check the rates of all banks and post offices, invest where you are getting more interest.
- To open an RD account in a bank, it is not necessary to have that bank account.
- RD account can be opened for a period of up to 10 years.
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