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Compound Interest Formula:
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Daily compound interest is the interest calculated on the initial principal and also on the accumulated interest from previous periods, compounded on a daily basis. This method allows your investment to grow faster compared to simple interest or less frequent compounding.
The calculator uses the compound interest formula for daily compounding:
Where:
Explanation: The formula calculates how much your investment will grow when interest is compounded daily, which is the standard compounding frequency for SBI accounts.
Details: Understanding compound interest is crucial for financial planning, investment decisions, and maximizing returns on savings. Daily compounding can significantly increase your returns over time compared to other compounding frequencies.
Tips: Enter the principal amount in INR, annual interest rate as a decimal (e.g., 0.075 for 7.5%), and time period in years. All values must be positive numbers.
Q1: What is the difference between daily and monthly compounding?
A: Daily compounding calculates and adds interest every day, while monthly compounding does it once a month. Daily compounding typically yields slightly higher returns over time.
Q2: How do I convert percentage rate to decimal?
A: Divide the percentage by 100. For example, 7.5% becomes 0.075 as a decimal.
Q3: Does SBI offer daily compounding on all accounts?
A: Most SBI savings accounts and fixed deposits offer daily compounding, but it's best to check the specific terms of your account.
Q4: Are there any taxes on the interest earned?
A: Yes, interest earned is subject to income tax as per Indian tax laws. TDS may be deducted depending on the amount and account type.
Q5: Can I use this calculator for other banks?
A: While designed for SBI, this calculator works for any financial institution that uses daily compounding, though interest rates may vary.