The Recurring Deposit (RD) calculator is a calculator letting us find the maturity value of the recurring deposits made. It involves a simple formula to calculate the interests on recurring deposits. However, before calculation of interest, keep the following aspects in mind:
The interest is compounded on a recurring deposit only after adding the amount in the first quarter.
Quarter 1: April to June
Quarter 2: July to September
Quarter 3: October to December
Quarter 4: January to March
As the compounding is done only after completion of the first quarter, the interest calculation until then will be based on simple interest method. In case a person plans to avail the RD scheme from the month of February, then the simple interest will be applicable from the same day until March followed by compound interest thereafter.
The simple interest formula:
I = P X R X T
I = Interest
P = Principal
R = Annual interest
T = tenure or the time period of scheme
M = R [ (1+i) n – 1]
M = Maturity Value
R = Monthly instalment
I = rate of interest/400
N = number of quarters
Thus, if a person is investing Rs. 1000 from January, then using the simple interest and compound interest formulas, he will benefit Rs. 12,801.9 on the year end at an interest of 12%.
Let us take another instance to understand the same. A girl makes a recurring deposit under a scheme for 30 months where she places Rs. 10,000 each month. The rate of interest earned is 5%. Now the amount she will benefit with on maturity will be Rs. 3, 20,095, and the interest amount included in the maturity value is Rs. 20,095.
It is simple and straightforward to determine the interest applicable under Recurring deposit scheme from the same formulae as mentioned above. However, it is advisable for customers to visit websites of the banks like SBI banks, ICICI Banks, etc. to know about their recurring deposit scheme. These banks usually have an online calculator helping you get the best returns.
It is easy to calculate the compound interest that is applied every quarter. Each of them are added to get the final amount on maturity. The formulae used to find compound interest is:
A = P (1 + r/n) ^ nt
A = final amount received
P = principal or the sum invested initially
r = annual interest rate (calculated in decimals)
n = number of times interest compounded each year
t = scheme tenure
The compound interest can be calculated using the above formula.