1. What is Daily Interest Calculation?

Daily interest calculation determines the amount of interest earned on a savings account each day based on the principal amount and annual interest rate.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount (currency)
• \( r \) — Annual interest rate (decimal)

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

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps savers track earnings, compare account yields, and maximize returns through compound interest strategies.

4. Using the Calculator

Tips: Enter principal amount in currency units and annual interest rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 represents the actual number of days in a year, providing a more accurate daily interest calculation for most savings accounts.

Q2: How does daily interest compound?
A: Daily interest can compound when added to the principal daily, but this calculator shows simple daily interest without compounding.

Q3: What's the difference between APR and APY?
A: APR is the annual rate without compounding, while APY includes compounding effects. This calculator uses APR for daily interest.

Q4: Can I use this for different compounding frequencies?
A: This calculator specifically calculates simple daily interest. Different formulas are needed for monthly, quarterly, or annual compounding.

Q5: How accurate is this calculation for real savings accounts?
A: While mathematically correct, actual bank calculations may vary slightly due to different day count conventions or account terms.