• Concept: Recurring Deposit (RD) is a banking instrument where people deposit a fixed amount every month; banks pay interest at a specified rate.

Maturity value is the amount of money, people get after a certain amount of time with interest.

 

  • Formula:  (i) the standard formula

Where, • P = monthly deposit

• n = number of months

• r = rate of interest

(ii) Maturity value (M.V) =  Total amount deposit + Interest

∴ M.V = P×n + Interest

  • How to solve Problems : Read the question and note down the values given in the question . Then apply the formula required for the question.
  • Example : (Q.1) Katrina opened a recurring deposit account with a Nationalised Bank for a period of 2 years. If the bank pays interest at the rate of 6% per annum and the monthly instalment is ₹1,000, find:
    (i) Interest earned in 2 years
    (ii) Matured value

Answer⇒  Monthly deposit(P) = ₹1,000,

Time(n) = 2 years = 24 months

Rate of interest(r) = 6% p.a.

                  (i) Interest earned(I) = (P×n×(n+1)×r)/(2×12×100) = ₹1,000 × 24 × 25 × 6/(2 × 12 × 100) = ₹1,500

                  (ii) Maturity value =P×n+I = ₹24,000 + ₹1,500 = ₹25,500

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