1. What is Daily Interest Calculation?

Daily interest calculation determines the interest accrued on a principal amount over a specific number of days, using a daily interest rate derived from the annual percentage rate (APR).

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Initial amount of money ($)
• \( Rate \) — Annual interest rate (%)
• \( Days \) — Number of days interest is calculated for

Explanation: The annual rate is divided by 365 to get the daily rate, which is then multiplied by the principal and number of days.

3. Importance of Daily Interest

Details: Daily interest calculations are crucial for loans, savings accounts, credit cards, and investments where interest compounds daily.

4. Using the Calculator

Tips: Enter principal amount in dollars, annual interest rate as a percentage (e.g., 5 for 5%), and the number of days. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Is 365 days always used for the calculation?
A: Most calculations use 365 days, but some financial institutions may use 360 days for simplicity.

Q2: Does this account for compounding interest?
A: This calculates simple daily interest. For compound interest, the calculation would be different.

Q3: How accurate is this calculation?
A: It provides a good estimate for most purposes, but actual financial products may have slightly different calculation methods.

Q4: Can I use this for credit card interest?
A: Yes, but credit cards often use average daily balance methods which are more complex.

Q5: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY (Annual Percentage Yield) does.