1. What is Daily Interest Calculation?

Daily interest calculation determines how much interest accrues on a loan or investment each day based on the principal amount and annual interest rate.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount (initial loan/investment)
• \( R \) — Annual interest rate (as a decimal)
• \( I \) — Daily interest amount

Explanation: The formula divides the annual interest by 365 days to calculate the daily accrual amount.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps borrowers know how much interest accrues between payments and helps investors calculate daily returns on investments.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the annual interest rate as a percentage. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 represents the actual number of days in a year, providing a more accurate daily calculation than the banking convention of 360 days.

Q2: Does this work for compound interest?
A: This formula calculates simple daily interest. For compound interest, a different formula accounting for compounding frequency is needed.

Q3: Can I use this for investments as well as loans?
A: Yes, the same formula applies to both loans (interest you pay) and investments (interest you earn).

Q4: What if my interest rate changes during the year?
A: This calculator assumes a constant interest rate. For variable rates, you would need to calculate separately for each rate period.

Q5: How accurate is daily interest calculation?
A: It provides a precise measure of daily interest accrual, though actual bank calculations may use slightly different methods for partial periods.