1. What is Compound Daily Interest?

Compound daily interest means that interest is calculated on your principal plus any accumulated interest on a daily basis. This results in faster growth compared to simple interest or less frequent compounding periods.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Future amount
• \( P \) — Principal investment amount ($)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time in years

Explanation: The formula accounts for daily compounding by dividing the annual rate by 365 and raising to the power of 365 times the number of years.

3. Importance of Compound Interest

Details: Understanding compound interest is crucial for financial planning, investment decisions, and recognizing how debts can grow over time. Daily compounding maximizes returns compared to monthly or annual compounding.

4. Using the Calculator

Tips: Enter principal in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does daily compounding compare to monthly?
A: Daily compounding yields slightly higher returns than monthly compounding because interest is calculated more frequently.

Q2: What's the difference between APR and APY?
A: APR is the annual rate without compounding, while APY includes compounding effects. This calculator shows APY equivalent results.

Q3: How accurate is this calculator?
A: It provides precise mathematical calculations, but actual bank results may vary slightly due to rounding methods or leap years.

Q4: Can I use this for debt calculations?
A: Yes, the same formula applies to credit cards or loans with daily compounding interest.

Q5: Why is the rate input as a decimal?
A: Mathematical formulas require decimal format (5% = 0.05). You can convert percentages by dividing by 100.