1. What is Daily Simple Interest?

Daily simple interest is the amount of interest earned or paid each day based on the principal amount and annual interest rate. It's commonly used in banking, loans, and investments where interest accrues daily.

2. How Does the Calculator Work?

The calculator uses the daily simple interest formula:

Where:

• \( P \) — Principal amount in dollars
• \( r \) — Annual interest rate in decimal form (e.g., 0.05 for 5%)

Explanation: The annual rate is divided by 365 to get the daily rate, which is then multiplied by the principal amount.

3. Importance of Daily Interest Calculation

Details: Calculating daily interest helps understand how much interest accrues each day, which is important for short-term loans, daily compounding accounts, and understanding the true cost of borrowing.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the annual interest rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from compound interest?
A: Simple interest calculates interest only on the principal, while compound interest calculates interest on both principal and accumulated interest.

Q2: Why divide by 365?
A: This converts the annual rate to a daily rate by assuming 365 days in a year. Some calculations might use 360 days for simplicity.

Q3: Can I use this for monthly interest?
A: For monthly interest, you would divide the annual rate by 12 instead of 365.

Q4: What if my rate is in percentage?
A: Convert percentage to decimal by dividing by 100 (e.g., 5% becomes 0.05).

Q5: How accurate is this calculation?
A: This provides a basic daily interest calculation. For precise financial calculations, consult with your bank or financial institution.