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Daily Interest Formula:
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Daily interest calculation determines the amount of interest earned or paid on a daily basis for savings or investments. It's particularly useful for accounts where interest compounds daily or for tracking daily interest accrual.
The calculator uses the daily interest formula:
Where:
Explanation: The formula divides the annual interest rate by 365 days to get the daily rate, then multiplies by the principal amount to calculate daily interest earnings.
Details: Understanding daily interest helps savers and investors track their earnings more precisely, compare different savings products, and understand how compounding works on a daily basis.
Tips: Enter the principal amount in your local currency and the annual interest rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.
Q1: Why divide by 365 instead of 360?
A: 365 days is used for actual/actual day count convention, which is standard for most savings accounts. Some financial institutions may use 360 days for simplicity.
Q2: Does this account for compounding?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex as interest would be added to the principal daily.
Q3: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) is the simple interest rate, while APY (Annual Percentage Yield) includes compounding effects. This calculator uses APR.
Q4: How accurate is daily interest calculation?
A: Very accurate for tracking daily earnings, but actual bank calculations may use slightly different methods or rounding rules.
Q5: Can I use this for loan interest calculations?
A: Yes, the same formula applies for calculating daily interest charges on loans, though loan terms may vary.