Home
Back
Daily Interest Rate Formula:
| From: | To: |
The daily interest rate represents the interest charged or earned per day, calculated by dividing the annual interest rate by 365 days. This calculation is essential for understanding daily compounding effects in loans, investments, and savings accounts.
The calculator uses the daily rate formula:
Where:
Explanation: This calculation assumes simple daily interest and is commonly used for daily compounding calculations in financial products.
Details: Calculating daily interest rates is crucial for understanding the true cost of loans, the actual returns on investments with daily compounding, and for accurate financial planning and budgeting.
Tips: Enter the annual interest rate as a percentage (e.g., 5 for 5%). The calculator will provide both percentage and decimal formats of the daily rate for your convenience.
Q1: Why divide by 365 instead of 360?
A: Most modern financial calculations use 365 days for greater accuracy, though some institutions still use 360 days for simplicity in certain calculations.
Q2: How does daily compounding affect overall interest?
A: Daily compounding results in slightly higher effective annual rates compared to monthly or annual compounding due to more frequent interest application.
Q3: Is this calculation used for credit cards?
A: Yes, credit card companies often use daily periodic rates calculated this way to determine daily interest charges on outstanding balances.
Q4: What's the difference between percentage and decimal formats?
A: Percentage format shows the rate as a percentage (e.g., 0.0137%), while decimal format shows it as a decimal (e.g., 0.000137) for direct multiplication in calculations.
Q5: Can I use this for investment calculations?
A: Yes, this daily rate calculation is fundamental for determining daily returns on investments, especially those with daily compounding like money market accounts.