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Daily Interest Rate Formula:
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Daily interest rate is the interest rate applied on a daily basis, calculated by dividing the annual interest rate by 365 days. It is commonly used in financial calculations for daily compounding, loan interest accrual, and investment returns.
The calculator uses the simple formula:
Where:
Explanation: This calculation converts an annual percentage rate to its equivalent daily rate for accurate daily interest calculations.
Details: Daily interest rate calculation is essential for accurate financial planning, loan repayment calculations, investment growth projections, and understanding the true cost of borrowing or return on investments.
Tips: Enter the annual interest rate as a percentage value. The calculator will automatically compute the equivalent daily rate. All values must be valid (non-negative annual rate).
Q1: Why divide by 365 instead of 360?
A: While some financial institutions use 360 days for simplicity, 365 days provides a more accurate representation of the actual daily rate for most calculations.
Q2: How is daily interest rate used in compounding?
A: For daily compounding, the daily rate is applied to the principal each day, resulting in interest being calculated on both principal and previously accrued interest.
Q3: Does this work for both loans and investments?
A: Yes, the same formula applies to both borrowing costs and investment returns when calculating daily interest.
Q4: What about leap years?
A: For precise calculations spanning leap years, some institutions may use 365.25 days, but 365 is the standard convention for most daily rate calculations.
Q5: How accurate is this calculation for real-world applications?
A: This provides the theoretical daily rate. Actual financial products may have different compounding methods or fee structures that affect the effective rate.