1. What is Daily Interest Calculation?

Daily interest calculation determines the amount of interest earned or charged each day on a principal amount. This method is commonly used in savings accounts, loans, and investments where interest compounds daily.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Initial amount of money (currency)
• \( Annual\ Rate \) — Annual interest rate expressed as decimal
• \( 365 \) — Number of days in a year

Explanation: The formula divides the annual interest rate by 365 to get the daily rate, then multiplies by the principal to calculate daily interest.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps in comparing financial products, calculating compound interest over time, and making informed decisions about savings and loans.

4. Using the Calculator

Tips: Enter principal amount in currency units, annual rate as decimal (e.g., 0.05 for 5%). All values must be valid (principal > 0, annual rate between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between daily and annual interest?
A: Daily interest calculates interest earned each day, while annual interest shows the total interest over one year. Daily compounding can lead to higher overall returns.

Q2: How does daily compounding work?
A: With daily compounding, each day's interest is added to the principal, and the next day's interest is calculated on the new, larger balance.

Q3: Why divide by 365 instead of 360?
A: 365 represents the actual number of days in a year. Some financial institutions use 360 for simplicity, but 365 is more accurate.

Q4: Can I use this for loan calculations?
A: Yes, this calculator works for both savings interest and loan interest calculations.

Q5: What if I want to calculate for a specific number of days?
A: Multiply the daily interest by the number of days to get the total interest for that period.