9.3.2.1 Managing institutional Banking transactions: Opening Savings accounts vs Recurring Deposit (RD) models (AICCGM)
PT1: Comparing Account Workflows
Let us visualize the flow of deposits over 12 months using a chart. For a Savings Account, the graph shows flexible deposits and flexible balance curves. For a Recurring Deposit (RD), the graph shows equal monthly steps accumulating linearly month by month. Red and blue indicators highlight how an RD enforces disciplined savings with fixed periodic deposits.
Part 1
PT2: Visualizing Sum of Equivalent Months
Look at the triangular array representing monthly interest durations. The total duration for interest calculation forms an arithmetic series from 1 to \(n\) months. The sum of equivalent single-month periods is given by the formula \(\frac{n(n + 1)}{2}\) months, or \(\frac{n(n + 1)}{2 \cdot 12}\) years.
Part 2
PT3: Maturity Breakdown Diagram
Consider a bar chart showing the composition of the final payout. The base of the bar represents the total principal deposited \(n \cdot P\), while the top segment shows the interest \(I\). The total height of the bar represents the Maturity Value \(MV\).