I opened a recurring deposit with Axis Bank for monthly installments of 10,000. The interest rates that was displayed initially was 6.60%. But the maturity amount after the 1 year period is only 124,350. When I calculated the yield it seems to be only half the interest rate. What is the logic behind this?
Recurring Deposit interest rates
- Thread starter abigale
- Start date
adriana144
New member
@abigale It would have been helpful if you explained how you made your calculations. My calculations seem to be near the amount that you mentioned.
This is how I calculated:
Assume you deposited 10,000 on 1-Jan-2019.
By 1-Feb-2019: Your 10K earns 55 as interest (= 10,000 x 6.6 / 100 / 12 => We are dividing it by 12 because the rate of interest is for 1 year and we are calculating only for 1 month).
You again deposit 10,000 on Feb 1st. So, the new principle is 10,000 + 10,000 + 55 = 20,055.
Similarly, it goes on for all the months, as follows:
Date
New Principle
Interest by end of month
Total by end of month
1-Jan-2019
10000
55
10055
1-Feb-2019
20055
110.3025
20165.3025
1-Mar-2019
30165.3025
165.9091638
30331.21166
1-Apr-2019
40331.21166
221.8216642
40553.03333
1-May-2019
50553.03333
278.0416833
50831.07501
1-Jun-2019
60831.07501
334.5709126
61165.64592
1-Jul-2019
71165.64592
391.4110526
71557.05698
1-Aug-2019
81557.05698
448.5638134
82005.62079
1-Sep-2019
92005.62079
506.0309143
92511.6517
1-Oct-2019
102511.6517
563.8140844
103075.4658
1-Nov-2019
113075.4658
621.9150618
113697.3809
1-Dec-2019
123697.3809
680.3355947
124377.7164
So, as you see here, 124,377.71 should be your final amount by the end of the year. Probably, some minimal amount should have been gone for some bank charges or something, but overall, this is what you should be getting.
Hope this clarifies. Please comment if you have any questions.
This is how I calculated:
Assume you deposited 10,000 on 1-Jan-2019.
By 1-Feb-2019: Your 10K earns 55 as interest (= 10,000 x 6.6 / 100 / 12 => We are dividing it by 12 because the rate of interest is for 1 year and we are calculating only for 1 month).
You again deposit 10,000 on Feb 1st. So, the new principle is 10,000 + 10,000 + 55 = 20,055.
Similarly, it goes on for all the months, as follows:
Date
New Principle
Interest by end of month
Total by end of month
1-Jan-2019
10000
55
10055
1-Feb-2019
20055
110.3025
20165.3025
1-Mar-2019
30165.3025
165.9091638
30331.21166
1-Apr-2019
40331.21166
221.8216642
40553.03333
1-May-2019
50553.03333
278.0416833
50831.07501
1-Jun-2019
60831.07501
334.5709126
61165.64592
1-Jul-2019
71165.64592
391.4110526
71557.05698
1-Aug-2019
81557.05698
448.5638134
82005.62079
1-Sep-2019
92005.62079
506.0309143
92511.6517
1-Oct-2019
102511.6517
563.8140844
103075.4658
1-Nov-2019
113075.4658
621.9150618
113697.3809
1-Dec-2019
123697.3809
680.3355947
124377.7164
So, as you see here, 124,377.71 should be your final amount by the end of the year. Probably, some minimal amount should have been gone for some bank charges or something, but overall, this is what you should be getting.
Hope this clarifies. Please comment if you have any questions.
@adriana144 Wow this was extremely helpful. Thank you for putting in your time and effort. I think it's pretty clear now. I guess I have to be wary of advertised interest rates and actually do the calculations myself.
