The calculation of interest on the fixed deposits will vary according to the choice made by the investor.
A fixed deposit that pays out interest will have a simple interest calculation. For example a 8 per cent deposit for Rs 1 lakh will have an interest of Rs 8,000 a year.
In case the payout is less than a year than the amount is paid proportionately so in the example above a half yearly payout will lead to a payment of Rs 4,000 every 6 months.
A cumulative fixed deposit will calculate interest every year which keeps getting added to the initial amount.
In these deposits the interest earned every year will rise as the base rises