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Calculation of Interest on Recurring account - YouTube
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In our previous lectures, you have
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learned, what is a recurring or
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a cumulative deposit account! Let’s
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recall. An investor, deposits a fixed
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amount every month for a specified
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number of months, right!
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So, an investor, let the investor be me or you.
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So, suppose I deposit a fixed amount. Fixed
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amount say, rupees thousand every month.
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ok! So, I have to deposit rupees thousand
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every month, till how many months? For a
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specified number of months. So, I and the
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bank will agree on some stated amount of
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months and I have to, I have to deposit
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that fixed amount say rupees thousand for
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that specific number of months and on
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expiry of this period, which period? This
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specific number of months. So, let me take
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this specific number of months, say as 24
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months. So, I have agreed with the bank
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that I will deposit rupees thousand
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every month for 24 months. That is two
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years. Now, as this term will expire as 24
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months will end, which is called the
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maturity period. So, after the end of my
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maturity period that will be 24 months,
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he gets the amount deposited by him
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together with the interest due to him. So,
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I will get, Rs1000 into 24.
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That is, my total money which I have
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deposited to the bank and along with
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that I will get the interest that has
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been accumulated on my deposits. So, what
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will I get? I’ll get the money which I have
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deposited, plus the interest that is due
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on my deposits. Now, in the previous
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lectures we’ve learned, how to
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calculate the interest on such deposits
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and also, how to calculate the maturity
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amount, that is the amount received at
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maturity. But, what if in the sums, some
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information is missing and you have
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been given the amount of maturity
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instead! Didn’t understand?
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Let's take an example, you will
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understand better.
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Saloni had a cumulative time deposit.
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Cumulative time deposit is same as
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recurring. So, Saloni has a cumulative time
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deposit in ‘City bank.’ She deposits Rs 500
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per month.
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What is the principle in this case? 500
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for a period of four years. So, she is
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depositing money that is Rs 500 per month,
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for a period of four years. You know, you
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have to convert this four years into
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number of months. Now, if at the time of
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maturity, she gets Rs 28,410. So,
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in this case what is missing? The rate of
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interest is missing here. So, in this sum
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you have not been given the information
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that how much was the rate of interest
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that was offered to Saloni. Instead, you
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have been given that at the time of
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maturity she received Rs 28,410. So,
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can you help find Saloni, what was the
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interest offered to her by the bank.
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Well, let's do it together.
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First, let us write the information, P
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that is money deposited per month,
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Rs 500.
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n that is the number of months for
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which the money is deposited, four months?
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No. 4 into 12, because the information
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is four years, so 4 into 12, you get 48
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months.
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r, is it given in the sum? No. So,
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r is a question mark for us, instead we
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have been given the amount of maturity.
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So, you can write the amount of maturity
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is Rs 28,410.
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Now, we know how to calculate interest on a
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recurring deposits, where SI is equal to P
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into n into (n + 1) by 2 into 12
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into r by 100. Right? But, we know, P.
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We know, n. But, we do not know r. What will
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we do? We'll keep r as r over here and
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then let us write this. So,
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SI will be
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P that is 500, into n that is 48, into
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(48 plus 1),
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by 2 into 12,
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into, we do not know r, so let's keep it as
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r by 100.
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Right! Solve this. What do you get?
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So, simplifying this, you get 490r.
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So, the interest that Saloni receive was
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490r, where r is the rate of interest
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percent per annum.
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Now, you know that amount of maturity can
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be calculated by adding up total
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money deposited and the interest. Now, we have
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been given the amount of maturity in the
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sum that was, 28,410. We have
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already calculated the interest, right!
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That was 490r, but what about the
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total money deposited? How will we calculate
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that? You know that per month she was
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depositing Rs 500 and she
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has deposited Rs 500 for 48 months.
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So, multiplying this will give our total
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money deposited. So, the total money
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deposited by Saloni is, 500 into 48.
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This is rupees 24,000. So, now we know
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that the amount of maturity is 28,410,
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the total money deposited is 24,000
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and the interest is 490r. So, we get an
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expression,
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like this, 24,000 plus 490r and
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at the time of maturity, she gets Rs
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28,410. So, lets equate it.
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24,000 plus 490r is
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28.410. So, find this missing r.
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Subtract these two. What do you get?
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490r is equal to 4,410. Now, r will be
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divided by 490.
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So, we get r is equal to 9. So, rate of
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interest offered to Saloni was 9 percent
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per annum. So, what you can do using those
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two formulas, where SI is equal to P into n
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into (n + 1) by 2 into 12, into r by
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100 and amount of maturity is equal to
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total money deposited plus interest, you
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can find out any missing value among
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these two formulas.
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