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Use-case: Window for back out without penalty ?
Interest Pay-out Simple Interest: Financial institutions also offers to pay the monthly realised interest component to its members as cash / cheque on monthly or quarterly based on the interest payout frequency selected for the FD Product.
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This type of FD's are generally offered as to give some income to the FD holders.
Post Maturity Interest Rate:
Customer should renew or withdraw upon the maturity of a Fixed Deposit. However, sometimes customers delay in doing so. In such scenario interest associated with the FD account will not be used for further interest calculation. Instead a regular interest rate or No interest is posted for those customer. Hence, to accommodate that there is a separate parameter provided as "Post Maturity Interest Rate"
Use Case: FD matured and customer not opted for renew or withdraw
Interest will be posted with the Post maturity interest rate as defined while creating a FD account for that customer.
Appendix:
Algorithm to calculate Effective Annual Rate (EAR) = (1 + (i/n))^n -1 where,
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