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 banking, loans, and investments to calculate interest accruing daily.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount in dollars
• \( r \) — Annual interest rate in decimal form (percentage divided by 100)
• 365 — Number of days in a year (some calculations use 360 for banking)

Explanation: The formula calculates what portion of the annual interest would accrue each day.

3. Importance of Daily Interest Calculation

Details: Calculating daily interest helps understand how interest compounds over time, compare different financial products, and make informed decisions about loans or 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?
A: This distributes the annual interest evenly across all days of the year. Some financial institutions use 360 days for simplicity.

Q2: How does this relate to compound interest?
A: Daily interest is the building block for daily compounding, where each day's interest is added to the principal for the next day's calculation.

Q3: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY does. Daily interest calculations help understand the difference.

Q4: When is daily interest used?
A: Common in savings accounts, credit cards, mortgages, and other financial products where interest accrues daily.

Q5: How accurate is this calculation?
A: It provides a basic estimate. Actual calculations may vary based on specific financial institution rules and compounding methods.