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Daily Interest Formula:
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The Daily Interest Formula calculates the amount of interest earned or paid each day on a principal amount at a given annual interest rate. This is commonly used in banking, investments, and loan calculations.
The calculator uses the Daily Interest Formula:
Where:
Explanation: The formula divides the annual interest rate by 365 to get the daily rate, then multiplies by the principal amount to calculate daily interest.
Details: Calculating daily interest is essential for understanding how interest accrues over time, comparing investment options, and managing debt repayment strategies.
Tips: Enter the principal amount in currency units and the annual interest rate as a percentage. Both values must be valid (principal > 0, rate ≥ 0).
Q1: Why divide by 365 instead of 360?
A: While some financial institutions use 360 days for simplicity, dividing by 365 provides a more accurate daily interest calculation based on the actual number of days in a year.
Q2: Does this formula account for compound interest?
A: No, this formula calculates simple daily interest. For compound interest, the calculation would need to account for interest earned on previously accrued interest.
Q3: How does daily interest affect long-term investments?
A: Daily interest compounding can significantly increase returns over time compared to annual compounding, as interest earns interest more frequently.
Q4: Can this formula be used for loans?
A: Yes, this formula can calculate daily interest charges on loans, though actual loan terms may vary based on the lending institution's policies.
Q5: How accurate is this calculation for leap years?
A: For maximum precision in leap years, some calculations use 366 days instead of 365. However, most financial institutions use 365 days consistently throughout the year.