What is a fixed deposit and how it works – CNBC TV18

Fixed Deposits (FD) is a popular investment option for investors who are looking for a safe and safe way to increase their money. They are easy to open and offer good returns. In an FD, investors have to keep a lump sum for a lump sum period at a predetermined rate for a certain period in their bank. Finally, investors receive the amount invested and compounded interest.

Compared to other market-led investments where returns fluctuate, FD provides guaranteed returns that are fixed when you open an account. Investors can also choose for monthly or quarterly payment. You can also take a loan against it, as FDs are fixed for a agreeable term. From flexibility of investment options to stability of returns, FDs provide several benefits to investors, making it a popular option to increase their wealth.

How does a fixed deposit work?

A fixed deposit is a type of investment that provides more interest than a guaranteed return and savings account. This enables you to invest outright payment once for a certain period.

How long is deposited in your bank, depending on the total deposits get interest on the total deposit. The duration of FD can range from seven days to ten years. You have the option to take early withdrawal from your FD account, but it can be fined.

You are free to choose how long a fixed deposit lasts. On the date of maturity, the account holder receives credit for the major amount plus interest. It also gives people a consistent source of income in the form of interest, which they can either reinstroof or reconstruct.

Here is an example to tell how it works:

Suppose you want to invest ₹ 2 lakh in FD. You choose to create a one -year fixed deposit account with the bank at a 7% annual interest rate. You will receive ₹ 2 lakh as your principal at the end of the year, as well as in 14,000.

To calculate your FD returns, you can use the following formula: A = p (1 + r/n)^(n*t). In the formula, A = maturity amount, p = principal zodiac, R = annual interest rate, n = number of compound periods per year and tenure of T = FD (in years).