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A fixed deposit (FD) is a financial instrument offered by banks and financial institutions that allows investors to deposit a lump sum of money for a fixed period at a predetermined interest rate. Fixed deposits provide higher interest rates than regular savings accounts and are considered low-risk investments. Upon maturity, the principal amount and accumulated interest are returned to the investor. FDs are popular for those seeking stable returns without exposure to market volatility.
An individual invests in a 1-year fixed deposit with a 5% interest rate, ensuring a guaranteed return at the end of the term without the risks associated with market fluctuations.
• A fixed-term investment with a predetermined interest rate.
• Offers higher returns than savings accounts with low risk.
• Principal and interest are returned upon maturity.
They provide guaranteed returns with minimal risk, making them attractive for conservative investors looking for safe, predictable income.
Rates are set by banks based on market conditions, monetary policy, and the term of the deposit, influencing overall returns.
Limited liquidity and penalties for early withdrawal can restrict access to funds, making FDs less flexible than other investment options.
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