1. What is Daily Interest?

Daily interest is the amount of interest earned or paid each day on a principal amount, calculated based on the annual interest rate divided by 365 days (UK convention).

2. How Does the Calculator Work?

The calculator uses the UK daily interest formula:

Where:

• \( Principal \) — The initial amount of money (£)
• \( Rate \) — Annual interest rate (as a percentage)
• \( 365 \) — Number of days in a year (UK convention)

Explanation: The formula calculates how much interest accrues each day on a given principal amount at a specified annual rate.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps with financial planning, comparing savings accounts, calculating loan costs, and managing investments where interest compounds daily.

4. Using the Calculator

Tips: Enter the principal amount in pounds (£) 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: The UK convention uses 365 days for interest calculations, while some other countries use 360 days.

Q2: How does this differ from compound interest?
A: This calculates simple daily interest. For compound interest, the calculation would include adding each day's interest to the principal.

Q3: Is this calculator suitable for all UK financial products?
A: Most savings accounts and loans in the UK use daily interest calculations, but always check your specific product terms.

Q4: What's a typical daily interest rate?
A: For a 1% annual rate on £10,000, daily interest would be about £0.27. Rates vary by product and market conditions.

Q5: How accurate is this for leap years?
A: The 365-day convention means leap years are treated the same, making calculations slightly less accurate for February 29th.