Mahindra Finance Fixed Deposits

#1
Hi Traders...

I had a query regarding the Mahindra Finance FD scheme which is currently open for subscriptions.

They have divided the scheme broadly into two..

1) Cumulative Scheme
2) Non cumulative half yearly scheme

Interest rate for cumulative scheme is slightly higher..

Can anyone please tell me the fundamental difference between these two schemes .. ?
I want to make one time investment fr a period of one year..
 
#2
Say you invest 100 rupees @ 10% cumulative for 2 years on date D.

On Date D, amount = 100.
On Date (D+1year), amount = 100*1.1 = 110. no money is paid to you.
On Date (D+2year = maturity date), amount = 110*1.1 = 121. you get 121 rs.

Non cumulative --
On Date D, amount = 100.
On Date (D+1year), amount = 100*1.1 = 110. 10 rupees will be paid back to you on this date.
On Date (D+2year = maturity date), amount = 100*1.1 = 110. You will get 110 rs on this date.

So, in cumulative scheme, you have got 121 rs on an investment of 100 rs and in non cumulative scheme, you have got (110+10 =) 120 rs.
So, effective yield(net annual returns) in cumulative = (121-100)/100*2 = 10.5%
and effective yield in non-cumulative = (120-100)/100*2 = 10%.

Now, suppose you are a smart person and invest 10 rs received on (D+1year) in some stock that gives you 100% return in 1 year. So, on date (D+2year), your 10 rs will become 20 rs and you will also receive 110 rs from non-cumulative fd.
total money = 110+20 = 130 rs on date (D+2year).

Does any of this make sense? I have not checked the mahindra scheme but that is the basic concept of cumulative and non-cumulative schemes.
Hope it helps. :)
 
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#4
there's no good or bad MF or stock. only depends on what you buy and when you buy it. you may find saint or Savant garde's or sudoku1's thread helpful.
learn to find your own answers :)
 

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