1. What is Daily Interest?

Daily interest is the amount of interest earned each day on a savings account or investment. It's calculated based on the principal amount and the annual interest rate, divided by 365 days.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount in dollars
• \( r \) — Annual interest rate in decimal form (percentage divided by 100)
• 365 — Number of days in a year

Explanation: The formula calculates how much interest you earn each day based on your account balance and the annual interest rate.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps savers estimate their earnings and compare different savings accounts. Many banks compound interest daily, making this calculation particularly relevant.

4. Using the Calculator

Tips: Enter your account balance in dollars and the annual interest rate as a percentage (e.g., enter 2.5 for 2.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is daily interest the same as compound interest?
A: No, daily interest is simple interest per day. Compound interest would include interest earned on previously accumulated interest.

Q2: Why divide by 365 instead of 360?
A: Most modern banks use actual days (365 or 366 in leap years), though some may use 360 days as a banking convention.

Q3: How does this relate to APY?
A: APY (Annual Percentage Yield) accounts for compounding, while this calculator shows simple daily interest before compounding.

Q4: Can I use this for loans?
A: This formula works for simple interest loans, but most loans use more complex amortization formulas.

Q5: How accurate is this calculation?
A: It's accurate for simple daily interest, but actual bank calculations may vary slightly based on their specific compounding methods.