Banking

 Banking                 Practice these sums👈

What is a Recurring Deposit (RD) Account?

A Recurring Deposit is a type of bank account where a person deposits a fixed amount every month for a certain period and earns interest on it.

It’s a small savings plan ideal for students or salaried individuals.

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🏦 Key Terms:

Term	Meaning
Monthly Deposit (P)	Fixed amount deposited every month
Rate of Interest (R)	Interest rate per annum (simple interest)
Time (n)	Total number of months
Interest (I)	Interest earned on the total deposit
Maturity Value (MV)	Total money received at the end (Principal + Interest)

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🔹 Formulas to Remember

1. Interest on RD Account

$$I = \frac{P \times n(n+1) \times R}{2400}$$

Where:

• $P$ = monthly deposit

• $n$ = number of months

• $\mathrm{<span\; class="katex"><span\; aria-hidden="true"\; class="katex-html"><span\; class="base"><span\; class="mord\; mathnormal">R</span></span></span>=\; annual\; interest\; rate</span>}$

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2. Maturity Value (MV)

$$MV = P \times n + I$$

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✅ Example

Q: A student deposits ₹500 per month for 12 months in an RD account at 8% p.a. Find the interest and maturity value.

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Step 1: Use formula for Interest

$$I = \frac{500 \times 12 \times (12+1) \times 8}{2400} = \frac{500 \times 12 \times 13 \times 8}{2400} = \frac{624000}{2400} = ₹260$$

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Step 2: Find Maturity Value

$$MV = 500 \times 12 + 260 = ₹6000 + ₹260 = ₹6260$$

🟩 Answer:
Interest = ₹260,
Maturity Value = ₹6260