Cummulative deposit

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sanjeev (Querist)
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03 January 2012 Can any one explain me the meaning of " Cummulative Deposit ".
Whether F.D deposited in the Bank for a fixed period can be consider as a Cummulative Deposit.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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03 January 2012 When periodically interest is calculated and it is added with the principal. Next periods interest will be calculated on the total amount.
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Bank FDs are generally cumulative deposits where interest is added quarterly.

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P0= Principal I =Interest A= Final Amount

After 1 period A1= P0+I1
AFTER PERIOD 2 A2= A1+I2
AFTER PERIOD 3 A3= A2+I3
(I1= Interest for 1 period(Year/Quarter/month) on P1. If R be the rate of interest I1= A0 X R/100)