1. What is Daily Interest Calculation?

Daily interest calculation determines the amount of interest earned or paid each day on a principal amount using simple interest accrual. This method divides the annual interest rate by 365 to calculate daily interest.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Initial investment or loan amount (currency)
• \( Annual\ Rate \) — Annual interest rate expressed as decimal
• \( 365 \) — Number of days in a year for daily calculation

Explanation: The formula calculates simple daily interest by dividing the annual rate by 365 days and multiplying by the principal amount.

3. Importance of Daily Interest Calculation

Details: Daily interest calculation is essential for understanding daily investment returns, loan interest accrual, and financial planning. It helps in comparing different financial products and making informed decisions.

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's the difference between simple and compound daily interest?
A: Simple daily interest calculates interest only on principal, while compound interest includes interest on previously earned interest.

Q2: Why divide by 365 instead of 360?
A: 365 represents actual calendar days, while 360 is sometimes used in commercial calculations. This calculator uses 365 for accuracy.

Q3: How do I convert percentage to decimal?
A: Divide the percentage by 100 (e.g., 5% = 0.05, 3.25% = 0.0325).

Q4: Can this be used for loans and investments?
A: Yes, this calculation works for both loan interest accrual and investment returns using simple interest.

Q5: What about leap years?
A: For precise calculations, some institutions use 365.25 days. This calculator uses 365 days for consistency.