Question

₹ P is deposited for n number of months in a recurring deposit account which pays interest at the rate of r % per annum. The nature and time of interest calculated is ______.

Options

• compound interest for n number of months.

• simple interest for n number of months.

• compound interest for one month.

• simple interest for one month.

Answer 1

₹ P is deposited for n number of months in a recurring deposit account which pays interest at the rate of r % per annum. The nature and time of interest calculated is simple interest for one month.

Explanation:

In standard recurring-deposit problems, each monthly instalment earns interest as simple interest for the months it remains in the account.

Summing those monthly simple-interest amounts gives the usual formula

`I = P xx [n(n + 1)/(2 xx 12)] xx (r/100)` 

So, the bank treats each instalment as earning simple interest on a one‑month basis i.e., interest computed monthly.