How To Shift Between Simple And Compound Interest Rates

wealthymattersNow that banks and other financial institutions are having to compete to raise deposits from the public,quite a few are resorting to a bit of window dressing.They quote annual yields,annualized returns or simple interest rates instead of compound interest rates for multi-year deposits.

Now a simple interest rate looks more impressive than a compound interest rate over longer periods of time ;so do check what sort of interest the seller is offering before locking your money away at a rate that looks great.

Here is a simple step-by-step way  that you can use to mentally estimate the compound interest rate that is equal to any simple interest rate. Read more of this post


Bank Fixed Deposits

wealthymatters.comA bank FD is a savings instrument where you deposit an amount with the bank for a fixed duration.You earn a fixed rate of interest on this investment. The interest rate is fixed at the time of the investment – even if interest rates change during the tenure of the FD, the interest that you earn on your FD remains fixed. A FD is also called a Term Deposit at times, as it is an investment for a pre-defined term.

All banks have their own rules on minimum deposits.Most nationalized banks will start a FD with just Rs.1000.

The tenure of a FD can be anywhere from 15 days to 10 years.The rate of interest offered on a FD depends on various parameters: the prevailing interest rates, the duration of the FD, the amount of the FD, your age, etc.Usually, the longer the tenure of the FD, the higher is the interest rate.However,when the economy has a liquidity crunch,banks do offer higher rates on short-term deposits too.They also come out with Special Term Deposits of more unusual tenures such as 555 days, 1001 days etc.Most banks offer a different rate of interest on FDs of more than a certain amount, usually Rs. 15 Lakhs.Also, most banks offer an extra 0.5% per annum to Senior Citizens.Some banks also offer different rates for Trusts and Societies. Read more of this post

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