March 30, 2012 9:55 pm
How do bank calculate interest. If it is 4% p.a then how bank credits me the interest after every three months? also, i would like to know how it is compounded yearly, half yearly or quarterly?
Thanks in advance
If you are not going to withdraw the interest amount it will then act as compounding factor in the next interest cycle. If you withdraw the compounding effect is gone.Which means its up to you to make it compound or not
In case of FD while opening the account itself you can specify the compound option
Mutual Fund(growth) and PPF is automatically compounded
Dear Rajan, in case of SB account, the interest is calculated on the daily end balance & credited qtly or 1/2 yly. It’s simple interest & not compounded.
In debt investments PPF investment will be having compounding effect.
In Mutual funds investments also u will have the power of compounding.
if u select the growth option then u can experience the power of compounding in long term.
the below link discussed in detail abt ur question.
Pls go through
Where I can get compound interest? I am mean in which kind of investment?
Dear Rajan, Bank FDs & RDs are example of compounding interest earning instrument. then there is PF or PPF.
There is no compounding in SB interest. The daily balances are averaged out (say for 180 days). Assume this avg is 1 lac. 4% interest is 4000. For 180 days it is 4000*180/365 = little short of Rs. 2000.
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