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Fixed Deposits<br />Vs.<br />Fixed Maturity Plans<br />By:<br />Sri Hasa				SahilMalhotra<br />2010193				2010195<br />
FDs<br />In an FD, you deposit an amount with the bank for a fixed duration.<br />You earn a fixed rate of interest on thi...
FMPs<br />Fixed Maturity Plans are close-ended debt schemes with a maturity horizon varying from one month to five years.<...
Indexation<br />Under Indexation, you are allowed by law to inflate the<br />cost of your asset by a government notified i...
How is cost-inflation indexcomputed? ?<br />• The cost inflation index (CII) is calculated as shown:<br />	Inflation Index...
Common features<br />The investors are aware of the returns before hand. <br />Both the instruments carry Credit Risk. <br...
Differences<br />FMP highlights Indicative Yield where else FD is assured returns. <br />FMP income, attracts the low rate...
Comparisons…<br />
Comparisons…<br />
Fixed maturity plans
Fixed maturity plans
Fixed maturity plans
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Fixed maturity plans

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Fixed maturity plans

  1. 1. Fixed Deposits<br />Vs.<br />Fixed Maturity Plans<br />By:<br />Sri Hasa SahilMalhotra<br />2010193 2010195<br />
  2. 2. FDs<br />In an FD, you deposit an amount with the bank for a fixed duration.<br />You earn a fixed rate of interest on this investment. The interest rate is fixed at the time of the investment – even if interest rates change during the tenure of the FD, the interest that you earn on your FD remains fixed. (The interest is not floating)<br />Thus, you invest a fixed amount, for a fixed duration, and earn a fixed interest on it. No wonder, it is called a fixed deposit!<br />A certificate of deposit is a time deposit product<br />
  3. 3. FMPs<br />Fixed Maturity Plans are close-ended debt schemes with a maturity horizon varying from one month to five years.<br />Launched with predetermined maturity date; so as the investments are made in such securities which mature at or around the same time as the schemes do. <br />Dividend or growth option<br />Investors are not allowed for premature redemption during period and are warranted to stay till maturity.<br />However, premature withdrawals are allowed on the stock exchanges where these units are listed and traded at market prices. <br />However this route is not yet very liquid. The schemes are shut down generally once they get matured.<br />
  4. 4. Indexation<br />Under Indexation, you are allowed by law to inflate the<br />cost of your asset by a government notified inflation<br />factor.<br />• This factor is called the ‘Cost Inflation Index’, from<br />which the word ‘Indexation’ has been derived.<br />• This inflation index is used to artificially inflate your<br />asset price.<br />• This helps to counter erosion of value in the price of an<br />asset and brings the value of an asset at par with<br />prevailing market price.<br />• This cost inflation index factor is notified by the<br />government every year. This index gradually increases<br />every year due to inflation.<br />
  5. 5. How is cost-inflation indexcomputed? ?<br />• The cost inflation index (CII) is calculated as shown:<br /> Inflation Index for year in which asset is sold<br />CII = --------------------------------------------------------------<br /> Inflation Index for year in which asset was bought<br />This index is then multiplied by the cost of the asset to<br />arrive at inflated cost.<br />
  6. 6. Common features<br />The investors are aware of the returns before hand. <br />Both the instruments carry Credit Risk. <br />However they are been assessed by credit agencies for quality. <br />
  7. 7. Differences<br />FMP highlights Indicative Yield where else FD is assured returns. <br />FMP income, attracts the low rate of Income tax have indexation benefit which makes it more tax efficient. <br />
  8. 8. Comparisons…<br />
  9. 9. Comparisons…<br />

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