1. What is Daily Interest Rate?

The daily interest rate is the interest rate applied on a daily basis, calculated by dividing the annual interest rate by 365 days. It's commonly used in finance for daily compounding calculations.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Annual Rate — The yearly interest rate in decimal form (e.g., 0.05 for 5%)
• 365 — Number of days in a year (some calculations use 360 for banking)

Explanation: This calculation provides the daily equivalent of an annual interest rate.

3. Importance of Daily Rate Calculation

Details: Daily rates are essential for accurate interest calculations in daily compounding scenarios, short-term loans, and financial modeling.

4. Using the Calculator

Tips: Enter the annual interest rate in decimal form (e.g., 0.08 for 8%). The rate must be between 0 and 1.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 is more accurate for actual daily calculations, though some financial institutions use 360 days for simplicity.

Q2: How does this relate to APR and APY?
A: Daily rates help convert between APR (annual percentage rate) and APY (annual percentage yield) when compounding is involved.

Q3: When would I need a daily rate?
A: For daily compounding accounts, credit card interest calculations, or any financial product that accrues interest daily.

Q4: Can I use this for continuous compounding?
A: No, continuous compounding uses a different formula involving natural logarithms.

Q5: How accurate is this calculation?
A: Perfectly accurate for simple daily rate conversion, but actual interest calculations may involve additional factors.