The daily interest rate in this instance would be 0.0137% (5%/365).
The daily interest rate is calculated by dividing the interest rate by 365, the number of days in a year. Suppose an investor deposits $10,000 into a savings account with a daily compounding interest rate of 5% per year. To comprehend how daily compound interest is calculated, let’s examine an example. With daily compound interest, investors earn interest on both the principal investment and the interest earned the day before. This indicates that interest is calculated and applied daily to the investment account. The frequency of compounding affects the amount of interest earned.ĭaily-calculated compound daily interest is a variation of compound interest. Daily, monthly, quarterly, or annual calculations of compound interest are possible, depending on the terms of the investment. This article will examine daily compound interest and its calculation.Ĭompound interest is the interest earned on both the initial investment and the interest accrued over time. Daily interest calculation is a variation of compound interest known as compound daily interest. Compound interest is a potent financial concept that enables investors to earn interest not only on their initial investment but also on interest earned over time.
