Recurring Deposit interest rate formula?
I want to find the rate of interest of a recurring deposit. suppose monthly inst. is Rs. 100, period is 24 months and maturity amount is Rs 2609. I want to find the Rate of interest. I want to know the formula for this. (Remember interest is quarterly compounded)
8 Comments Already

100 * (1 + r/4)^8 = 2609
Solve for r to get a rate of 2.01 = 201% p.a.
I don’t think i read the question right.
I’m lookin properly at it now. You want deposits added at the start of every month correct?
If that’s the case you’re solving an equation such as:
(1 + r/4)^8 + … + (1 + r/4)^1 = 26.09
Not sure how you solve that one…
Just checked: someone else agreed with me, good luck
solving that without a computer
Check this out:
http://en.allexperts.com/q/BasicMath657/CompoundInterestRate.htm
Hey I think Biglildan is correct.
i= 100
n=2yrs
r=?
a= 2609
p= 2609 – 100 = 2509
i = p*n*r
100
100 = 2509*2*r
100
100*100=2509*2
r= 1.99282583
monthly instalments compounded quarterly sounds very strange. its easier to work with a monthly interest rate, and then adjust using 1+quarterly = (1+monthly)^3
let g = 1+r where r = monthly interest rate
assuming deposits at the start of each month
your first 100 accumulates to 100 g^24
… you last 100 accumulates to 100 g^1
so you have 100 g ( 1 + g + .. + g^23) = 100 g (g^241) / (g1)
which should be 2609
so 100 (g^25 – g) = 2609 (g1)
or g^25 – 27.09g +26.09 = 0
You cant solve this algebraically, but you can do it by successive approximation or other numerical methods.
R=100/PN N = 8*8+1
The general formula for compound interest is
A = P[1 + (R/100)]^N when interest is calculated yearly basis
In the above case the interest is calculated quarterly therefor the effective rate is r = R/4
and the effective period = 2 Ã— 4 = 8
Principle = 100 Ã— 24 = 2400
2609 = 2400 [1 + (R/400)]^8
or 2609/2400 = [1 + (R/100)]^N
1.0871 = [1 + (R/100)]^N
1.010493879 = [1 + (R/400)]
1.010493879 â€“ 1 = (R/400)]
or 0.010494 = R/400
R = 0.010494 Ã— 400 = 4.1976 = 4.2 %
The following website will provide you the exact answer you are looking for, just insert the values that you know. I started by entering an assumed interest rate of 2.5 % and finally ended with an actual value of 3.95% by incrementing it by 0.1 or 0.05 etc. Assuning that you started with 100 and deposited 100 thereafter every month for two years and your final value was 2609.
Hope this helps.
http://www.debtrelief.com.au/intcalc.php
Hi,
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thankyou