1. What is Daily Interest Accrual?

Daily interest accrual refers to the amount of interest that accumulates on a principal amount each day based on an annual interest rate. This calculation is fundamental in finance for loans, savings accounts, and investments.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount in dollars
• \( r \) — Annual interest rate in decimal form
• 365 — Number of days in a year (simple interest calculation)

Explanation: The formula divides the annual rate by 365 to get the daily rate, then multiplies by the principal to get the daily interest amount.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps borrowers and investors know exactly how much interest accrues each day, allowing for better financial planning and comparison between different financial products.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 5 for 5%), and the number of days to calculate both daily and total accrued interest.

5. Frequently Asked Questions (FAQ)

Q1: Does this calculator account for compound interest?
A: No, this calculates simple daily interest. For compound interest, the calculation would be more complex.

Q2: Why divide by 365 instead of 360?
A: Most modern financial institutions use 365 days. Some may use 360 days (banker's year), which would yield slightly higher daily interest.

Q3: How does leap year affect the calculation?
A: The difference is negligible for most purposes, but for exact calculations in a leap year, you could divide by 366 instead.

Q4: Can I use this for credit card interest?
A: Credit cards typically use daily compounding, so this simple interest calculation would underestimate the actual interest.

Q5: How accurate is this for loans?
A: This provides a basic estimate. Actual loan interest may be affected by payment schedules, compounding, and other factors.