Fixed Deposit

1. What are fixed deposits ?

A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date.  It allows you to invest money for a fixed period of time and most of the time at a fixed rate of interest.It may or may not require the creation of a separate account.

2.  Types of Fixed Deposits

There are mainly 2 kinds of FD Bank FD and corporate FD

• Bank FD : Bank FDs are offered by banks or other non-banking financial companies. Both these institutions are regulated by the RBI,  They offer a fixed rate of interest and guaranteed money at maturity.

• Corporate FD : Corporate FDs are offered by corporates who are looking to raise money from the open market. Corporate FDs pay a higher rate of interest because they carry a higher risk than bank FDs. The interest in not guaranteed on investment. 

 3. How is Interest on FD calculated ?

 

There are mainly three factors for calculating interest on the FD .

• Interest Rate
• Duration 
• Frequency of Compounding

Most banks iu India offer a quarterly compound interest on fixed deposits. You can find online calculators for calculating the interest earned on maturity. These online .calculators are provided by banks itself as well.

at the interest rate and the duration while investing in an FD, but also at the frequency of compounding.

Read more at: http://www.livemint.com/Money/rgEL3CtwlxoBIvCFoCIhgI/Dejargoned-Fixed-deposit-interest-rate-calculation.html?utm_source=copy