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Daily Interest Formula:
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Daily simple interest is the interest calculated each day on the principal amount based on the annual interest rate divided by 365 days. This method provides a precise way to calculate interest for short-term investments or loans.
The calculator uses the daily interest formula:
Where:
Explanation: The formula calculates the daily interest earned or charged by dividing the annual rate by 365 and multiplying by the principal amount.
Details: Daily interest calculation is essential for accurate financial planning, investment analysis, loan repayment schedules, and understanding the true cost of borrowing or return on investment over time.
Tips: Enter the principal amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%). All values must be valid (principal > 0, rate between 0-1).
Q1: What is the difference between daily simple interest and compound interest?
A: Daily simple interest calculates interest only on the principal amount each day, while compound interest calculates interest on both principal and accumulated interest.
Q2: How do I convert percentage rate to decimal?
A: Divide the percentage by 100. For example, 5% becomes 0.05, 7.25% becomes 0.0725.
Q3: Why use 365 days instead of 360?
A: 365 days provides a more accurate calculation for annual interest since there are 365 days in a year, though some financial institutions use 360 days for simplicity.
Q4: Can I calculate monthly interest from daily interest?
A: Yes, multiply the daily interest by the number of days in the month (typically 30 or 31 days).
Q5: Is this calculator suitable for all types of loans and investments?
A: This calculator is designed for simple interest calculations. For compound interest, different formulas and calculators should be used.