Question 1

What is the difference between FD and RD?

Accepted Answer

A Fixed Deposit (FD) requires you to deposit a lump sum once and earn interest till maturity. A Recurring Deposit (RD) requires you to deposit a fixed amount every month and earn interest on each installment.

Question 2

How is FD interest calculated?

Accepted Answer

FD interest is calculated using compound interest: M = P × (1 + r/n)^(n×t), where P is principal, r is annual rate, n is compounding frequency per year, and t is tenure in years.

Question 3

How is RD interest calculated?

Accepted Answer

RD uses quarterly compounding as per RBI standard. Each monthly installment earns compound interest for the remaining tenure. The maturity is the sum of all installments compounded for their respective periods.

Question 4

Which is better — FD or RD?

Accepted Answer

If you have a lump sum, FD generally gives more returns since the entire principal earns interest from day one. If you want to save monthly, RD is the better choice as it builds a habit of regular saving.

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