1. What is Daily Interest?

Daily interest is the amount of interest earned each day on your principal balance in a high-yield savings account. It's calculated by dividing your annual interest by 365 days.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (in decimal form)

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 you estimate earnings from savings accounts, compare different account options, and see how compound interest grows your money over time.

4. Using the Calculator

Tips: Enter your principal amount in dollars and the annual interest rate as a percentage (e.g., 3.5 for 3.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from compound interest?
A: This calculates simple daily interest. Most savings accounts compound interest daily or monthly, which would earn slightly more over time.

Q2: Why divide by 365 instead of 360?
A: 365 is standard for daily interest calculations, though some banks use 360 days which results in slightly higher daily amounts.

Q3: Does this account for APY or just APR?
A: This calculates based on APR (nominal rate). APY includes compounding effects and would be slightly higher.

Q4: How accurate is this for real-world calculations?
A: This provides a good estimate, but actual bank calculations may vary slightly based on their specific compounding methods.

Q5: Can I use this for other types of accounts?
A: Yes, it works for any simple interest calculation, though most investment accounts use more complex formulas.