SBI FD of 10 years at 9.00% Vs NABARD BNB (invest 8500 and get 20000 after 10 years) which is better option?

Question

SBI FD of 10 years at 9.00% Vs NABARD BNB (invest 8500 and get 20000 after 10 years) which is better option?

Answer 1

Nabard is obviously better :-)

Answer 2

If the SBI compounds annually you will end up with 2.367 (1.09^10) times the amount you invested.

If you invest 8,500 and get back 20,000 you end up with 2.352 (20000/8500) times the amount you invested.

So, if the SBI compouds annually it gives you a slightly higher return.

If the SBI pays you the interest directly it is a better deal if you are able to reinvest the interest received in something that will pay you 9% or more.

Taxation policy may also have an impact on which investment is superior. Since I do not know the tax situation I assumed it is a tax-free investment.