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Daily Accrual Interest Formula:
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Daily accrual interest calculates the interest earned or paid on a principal amount based on a daily compounding period. This method is commonly used in savings accounts, loans, and investments where interest accumulates daily.
The calculator uses the daily accrual interest formula:
Where:
Explanation: The formula calculates interest by converting the annual rate to a daily rate (dividing by 365) and multiplying by the principal and number of days.
Details: Daily interest calculation provides more accurate results for short-term investments and loans, reflecting the actual time value of money and enabling better financial planning and comparison of different financial products.
Tips: Enter the principal amount in currency, annual interest rate as a percentage, and time period in days. All values must be positive numbers.
Q1: Why divide by 365 instead of 360?
A: While some financial institutions use 360 days for simplicity, dividing by 365 provides a more accurate daily rate calculation based on the actual number of days in a year.
Q2: Does this calculator account for compounding?
A: This calculator calculates simple daily interest. For compound interest, the calculation would be different and would involve exponential growth over time.
Q3: Can I use this for loan interest calculations?
A: Yes, this formula works for both interest earned on investments and interest paid on loans, as long as the interest is calculated on a daily accrual basis.
Q4: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't include compounding, while APY (Annual Percentage Yield) does. This calculator uses APR for daily accrual calculation.
Q5: How accurate is daily interest calculation?
A: Daily interest calculation provides the most precise method for interest accrual, especially for accounts where the balance changes frequently or for short-term periods.