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Daily Simple Interest Formula:
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Daily simple interest calculates interest earned or paid on a principal amount for a specific number of days, based on an annual interest rate. It's commonly used in short-term loans, savings accounts, and financial calculations where interest accrues daily.
The calculator uses the daily simple interest formula:
Where:
Explanation: The formula calculates the interest amount by multiplying the principal by the annual rate and number of days, then dividing by 100 (to convert percentage to decimal) and 365 (days in a year).
Details: Accurate daily interest calculation is crucial for financial planning, loan repayment schedules, investment returns, and understanding the true cost of borrowing or earnings from investments over short periods.
Tips: Enter the principal amount in currency units, annual interest rate as a percentage, and number of days. All values must be positive numbers (principal > 0, rate ≥ 0, days > 0).
Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.
Q2: Why divide by 365 instead of 360?
A: This calculator uses 365 days for a full year calculation. Some financial institutions use 360 days for simplicity, but 365 provides a more accurate daily rate.
Q3: Can this calculator handle different currencies?
A: Yes, the calculator works with any currency as long as you maintain consistent currency units for both principal and interest results.
Q4: Is this suitable for leap years?
A: The calculator uses 365 days as standard. For precise leap year calculations (366 days), you may need to adjust the formula accordingly.
Q5: How accurate is daily simple interest for long periods?
A: While suitable for short-term calculations, for longer periods compound interest typically provides a more accurate representation of interest growth.