What is reinvestment of interest in fixed deposit?

When you open an FD, you can choose between monthly or quarterly interest pay-outs and reinvestment of interest. To increase your return, choose the reinvestment option. In this option, your interest amount is reinvested in the FD, and you start to earn interest on interest!

How is fixed deposit interest rate calculated?

The interest rate on fixed deposit is usually calculated using two methods – simple interest and compound interest. Simple Interest: This is a pre-fixed rate of interest at a fixed period of time. It is calculated by multiplying the rate of interest per annum, the principal amount, and the tenure in years.

How is reinvested interest calculated?

The interest-on-interest formula for reinvested coupon payments assumes the reinvested payments grow at an interest rate equal to the bond’s stated YTM. To calculate this total, raise 1 plus the YTM rate to the nth power, where “n” is the number of payment periods. Subtract 1 and divide by the YTM rate.

What do you mean by reinvestment deposits?

A Reinvestment Deposit Plan basically allows you to reinvest the interest earned on your deposit. Can I apply for a Reinvestment Deposit Plan? If you would like to retain your deposits and accumulate it with interest, you can apply for a Reinvestment Deposit Plan.

What is reinvestment plan in Indian bank?

The Indian Bank Reinvestment Plan is among the best of its kind in the market today, with quarterly compounding interest and automatic renewal facilities. This is a term deposit which reinvests all earned dividends, capital gains, and interest back into buying units or shares, rather than paying out in cash.

How is monthly interest calculated?

To calculate the monthly interest, simply divide the annual interest rate by 12 months. The total number of periods is calculated by multiplying the number of years by 12 months since the interest is compounding at a monthly rate. In this case, the total number of periods is 60, or 5 years x 12 months.