How to calculate interest on recurring deposits?
Understand Compound Interest To Understand Recurring Deposit Interest
Think of RD Installments and Series of Principal Payments
When you create a RD for Rs. 10,000 for 2 years, what you’re doing is depositing Rs. 10,000 with the bank every month for 24 months, and the bank pays you interest on Rs. 10,000 for 2 years compounding it quarterly, then for the next Rs. 10,000 it pays you interest for 23 months, and so on and so forth.
Banks usually compound interest quarterly, so the first thing is to look at the formula for compound interest.
That formula is as follows:
A formula for calculating annual compound interest is:
A=P(1+r/n)^nt
Where,
A = final amount
P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal, not in percentage)
n = number of times the interest is compounded per year
t = number of years
In your recurring deposit, you use this formula to calculate the final amount with each installment, and at the end of the installments, you add them all up to get the final amount.
Think of RD Installments and Series of Principal Payments
Let’s take a simple example to understand this – suppose you start a recurring deposit for Rs. 2,000 per month for 1 years at 9.75% compounded quarterly. If you were to see this number as a standalone fixed deposit that you set up every month for 12 months, you could come up with a table like I have here. Before you get to the table, here is a brief explanation on the columns.
Month: First column is simply the Month.
Principal (P): Second column is P or principal investment which is going to be the same for 24 months,
Rate of Interest (r): r is going to 9.75% divided by 100.
1+r/n: In our case, n is 4 since the interest is compounded quarterly, and 1+r/n is rate divided by compounding periods.
Months Remaining: This is simply how far away from 2 years you are because that’s how much time your money will grow for.
Months expressed in year: I’ve created a column for Months expressed in a year since that makes it easy to do the calculation in Excel.
nt: 4 multiplied by how many months are remaining as expressed in year.
(1+r/n)^nt: Rate of interest raised by the compounding factor.
Amount (A): Finally, this is the amount you if you plug in the numbers in a row in the compound interest formula.
So, Rs. 2000 compounded quarterly for 1 years at 9.75% will yield Rs. 25295 after 2 years. The last row contains the grand total which is what the RD will yield at the end of the time period.
Important Announcement - CPT June 2012 Examination
| IMPORTANT ANNOUNCEMENT | ||
| ||
Due to unavoidable circumstances, the examination Centre of 200 candidates bearing Roll No. from 218290 to 218489 for CPT (Common Proficiency Test - Examination) to be held on 17th June, 2012 has been changed to DOON PUBLIC SCHOOL, B-2, PASCHIM VIHAR, BEHIND LAXMI NARAYAN MANDIR, NEW DELHI-110 063 ( in place of St. Mathew’s Public School, A-6 Paschim Vihar, New Delhi-110 063). Admit Card already issued remains the same and valid for appearing in the said CPT at Doon Public School, New Delhi. Candidates bearing Roll No. from 218290 to 218489 are requested to make a note of the above and accordingly appear at Doon Public School, New Delhi. Candidates are advised, in their own interest, to visit in advance the Doon Public School, B-2, Paschim Vihar, New Delhi to familiarize themselves with the location of the said School. Help Desk Numbers: (0120) 3054 851, 3054 852, 3054 853, 3054 835, 3054 806. E-mail: cpt_exam@icai.in | ||
| Additional Secretary (Exams.) |
Self-Assessment Quiz for Common Proficiency Test (CPT)
ICAI enters into an arrangement with Taxmann to provide the contents of website
As you may be kindly aware, as an ongoing attempt to enable the members to keep pace with the latest developments in important fields like direct taxes, company law, service tax etc., the Direct Taxes Committee of ICAI has entered into an arrangement with Taxmann, a reputed and a well known publisher, who has agreed to provide all materials that are published and made available by it as a part of its standard practice and procedure on its website www.taxmann.com at a negotiated price of Rs. 3500/- p.a. vis-a- vis its market value which is Rs.7500/-. With this, the Committee has tried to make available, in a timely manner, relevant educational resources at a nominal cost to the members, which in turn would enable them to discharge their functions in an effective manner. We hope that you would have taken the benefit of this arrangement between ICAI and Taxmann. However, if you have not availed the benefit till now, you can still do so by clicking on the link below:
We wish to inform you that this facility is available to members of ICAI ONLY. The detailed features of the site www.taxmann.com are given below:
ü 127 years of Direct Tax Laws (1886-2012) covering 42000 judgments of Supreme Court/High courts since 1886, 19000 Orders of ITAT, 10500 Notifications, 2100 Circulars and 6000 Articles
ü 100 years of Company Law (1913-2012) covering 9800 Judgments/Orders of Supreme Court/High Courts/SAT/CLB/CCI/CAT/ATFE on company Law/Securities Laws/ Foreign Exchange Laws. The Laws covered are Company Laws, Securities Laws, Foreign Exchange Laws, Competition Laws, Banking & Insurance Laws, Other Corporate Laws, 150 Acts, 350 Rules, 900 Forms, 6000 Circulars, 2500 Notifications and 2500 Articles.
ü Complete Data on Service Tax (1994-2012) covering 5800 Judgments of Supreme Court/High Court/CESTAT, Acts, Rules, Circulars, Notifications, Articles.
ü Besides Daily Reporting of case laws, the website shall provide Updated Acts, Rules, Circulars & Notifications.
In addition, the Taxmann also provides the following Value added e-services without any cost, irrespective of fact WHETHER OR NOT you have opted for the above facility:
a) Taxmann’s Mobile Application For Android and Blackberry Phone
b) Taxmann’s Daily e-Newsletter
c) Taxmann’s sms services
In order to avail the above mentioned value added services without any cost, please click on the link below and register yourself for the same.
We hope that the members would take maximum benefit from this arrangement and keep themselves updated for the benefit of the profession and nation as a whole.
IFRS-Workshop
Studycafe is conducting a workshop on IRFS for Members and Students. Batch size will be around 8-10 students and Faculty will be from big four CA Firms who are masters in this Field. Course duration will be 15 days,3 months or 6 months depending on regular or weekend classes or type of the below course:
1. IFRS - basics
2. Valuation - basics and advance
3. Accounting - practical difficulties
4. Risk evaluation - business process
Limited Seats available. If you are interesting to join the Batch then contact us @ contact@studycafe.in
Location is New Delhi.
1. IFRS - basics
2. Valuation - basics and advance
3. Accounting - practical difficulties
4. Risk evaluation - business process
Limited Seats available. If you are interesting to join the Batch then contact us @ contact@studycafe.in
Location is New Delhi.
Subscribe to our mailing list to get the updates to your email inbox.. Just Enter your email id below and click on subscribe button! After that, verify it through the verification email received on your email id and start learning more!..
Posts
