1. What is Daily Accrual?

Daily accrual refers to the amount of interest that accumulates each day on a principal amount based on a specified annual interest rate.

2. How Does the Calculator Work?

The calculator uses the daily accrual formula:

Where:

• \( Principal \) — Initial amount in dollars
• \( Rate \) — Annual interest rate in decimal form
• \( 365 \) — Number of days in a year

Explanation: The formula calculates the daily interest by spreading the annual interest evenly across all days of the year.

3. Importance of Daily Accrual Calculation

Details: Calculating daily accrual is essential for accurate financial planning, loan amortization, investment tracking, and accounting purposes.

4. Using the Calculator

Tips: Enter principal amount in dollars, interest rate in decimal form (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 is more accurate for actual/actual day count conventions, while 360 is used for some commercial loans (30/360 convention).

Q2: How does compounding affect daily accrual?
A: This calculator shows simple daily accrual. For compound interest, the calculation would be different.

Q3: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. This calculator uses APR for daily accrual.

Q4: Can I use this for credit card interest?
A: Yes, but credit cards typically use average daily balance method with compounding.

Q5: How accurate is this for leap years?
A: For maximum precision in leap years, divide by 366 instead of 365.