Rajeev breaks his FD after 6 months
In this case, the interest calculation changes.
Since Rajeev had booked the FD for one year, the bank had offered a rate of interest of 8% per annum. However, it is important to remember that while Rajeev had booked the FD at 8% p.a. since he decides to withdraw it prematurely, the bank will not pay interest at 8% p.a. for six months. Instead, it will pay interest applicable for a six-month deposit. In this case, the interest rate for a six-month deposit was 6%.
Further, the bank will charge a penal interest of 0.5% on premature withdrawals. Therefore, the effective interest rate will be
Effective rate of interest = 6-0.5 = 5.5%
Therefore, the bank will calculate interest as follows:
FD Interest=200000 ×5.5100=Rs. 11,000
On maturity of the FD, Rajeev.
