1. What is Daily Interest Calculation?

Daily interest calculation determines how much interest accrues on a principal amount each day based on an annual interest rate. This is particularly useful for savings accounts, loans, and investments where interest compounds daily.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Initial amount in pounds (£)
• \( Rate \) — Annual interest rate (percentage)
• \( 365 \) — Number of days in a year

Explanation: The formula converts the annual rate to a daily rate by dividing by 365 days, then applies it to the principal amount.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps in financial planning, comparing investment options, and calculating accurate interest charges or earnings over specific periods.

4. Using the Calculator

Tips: Enter the principal amount in pounds, the annual interest rate as a percentage, and the number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: In the UK, financial institutions typically use 365 days for daily interest calculations, as it represents the actual number of days in a year.

Q2: Does this calculator account for compounding?
A: This calculator shows simple daily interest. For compound interest, the calculation would be more complex as interest would be added to the principal each day.

Q3: Is the interest rate entered as a percentage or decimal?
A: Enter the rate as a percentage (e.g., for 5% interest, enter "5" not "0.05").

Q4: Can I use this for loan calculations?
A: Yes, this calculator works for both interest earned on savings and interest charged on loans.

Q5: How accurate is this calculation for leap years?
A: For maximum precision in leap years, some calculations use 366 days. This calculator uses 365 days as standard practice.