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Daily Interest Formula:
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Daily interest calculation determines the amount of interest earned or paid on a daily basis for a given balance and annual interest rate. This is particularly useful for savings accounts, loans, and investments where interest compounds daily.
The calculator uses the daily interest formula:
Where:
Explanation: The formula calculates the proportional daily interest based on the annual rate, dividing by 365 days to get the daily rate.
Details: Understanding daily interest helps in comparing financial products, calculating compound interest, and managing personal finances more effectively. It's essential for accurate financial planning and forecasting.
Tips: Enter the balance in pounds (£) and the annual interest rate as a percentage. The calculator will compute the daily interest amount. All values must be valid (balance > 0, rate ≥ 0).
Q1: Why divide by 365 instead of 360?
A: In the UK, financial calculations typically use 365 days per year for daily interest calculations, following the actual/365 day count convention.
Q2: Does this calculator account for compounding?
A: This calculator provides simple daily interest. For compound interest, the calculation would need to account for interest being added to the principal daily.
Q3: Can I use this for loan interest calculations?
A: Yes, this formula works for both interest earned on savings and interest paid on loans, though loan terms may vary.
Q4: What if the interest rate is 0%?
A: If the interest rate is 0%, the daily interest will be £0.00 regardless of the balance amount.
Q5: How accurate is this calculation for leap years?
A: This calculator uses 365 days for simplicity. For precise calculations in leap years, some institutions may use 366 days.