Recurring deposits — Part 1: How the interest is earned: visual lesson, ICSE Class 10 Mathematics

Lesson

Banking: Recurring Deposit Accounts, Part 1

Save a fixed sum every month; the bank adds interest. How much interest?

In this lesson you will

Explain how a recurring deposit account works
Find the principal for one month from the monthly balances
Calculate the interest with the formula, with the period in months
Explain why the interest grows faster than the period

How a recurring deposit works.

Concept

What you will be able to do

Describe a recurring deposit account
Find the principal for one month from the monthly balances
Use the interest formula with $n$ in months
Compare deposits of different lengths

Concept

What is a recurring deposit?

A recurring deposit account collects a fixed monthly instalment $P$ for $n$ months. The bank pays simple interest at $r\%$ per annum and returns everything at maturity.

The language of recurring deposits.
Term	Meaning	Letter
Monthly instalment	the fixed sum paid every month	$P$
Period	number of months (instalments)	$n$
Rate of interest	per cent per annum	$r$
Interest	simple interest earned on all the instalments	$I$
Maturity value	amount paid back at the end	MV

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