1. What is Daily Interest?

Daily interest is the amount of interest earned or paid each day on a principal amount based on an annual interest rate. It's commonly used in savings accounts, loans, and investments that compound interest daily.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Initial amount of money ($)
• \( Annual Interest Rate \) — Yearly interest rate in decimal form (e.g., 0.05 for 5%)
• \( 365 \) — Number of days in a year

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

3. Importance of Daily Interest Calculation

Details: Calculating daily interest helps understand how much interest accrues each day, which is crucial for comparing financial products, planning repayments, and maximizing investment returns.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Should I use 365 or 360 days for calculations?
A: Most financial institutions use 365 days, but some use 360. Check with your specific institution for their method.

Q2: How does this differ from compound interest?
A: This calculates simple daily interest. Compound interest would include interest earned on previously accumulated interest.

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 interest calculation.

Q4: How accurate is this for leap years?
A: The calculation uses 365 days, so it slightly overestimates daily interest in leap years (by about 0.27%).

Q5: Can I use this for credit card interest?
A: Yes, but credit cards typically use daily compounding, so the actual charge might be slightly higher.