1. What is Daily Simple Interest?

Daily simple interest is calculated on the principal amount only, based on the daily interest rate derived from the annual rate. It's commonly used for short-term loans, savings accounts, and investment calculations.

2. How Does the Calculator Work?

The calculator uses the daily simple interest formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (%)
• \( d \) — Number of days

Explanation: The annual interest rate is divided by 365 to get the daily rate, then multiplied by the principal and number of days to calculate total interest.

3. Importance of Daily Interest Calculation

Details: Daily interest calculation is essential for accurate financial planning, loan repayment schedules, investment returns, and understanding the true cost of borrowing or earning potential of savings.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, and number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both principal and accumulated interest.

Q2: Why divide by 365 instead of 360?
A: 365 represents the actual number of days in a year. Some financial institutions use 360 days for simplicity, but 365 is more accurate.

Q3: Can this calculator be used for loans and investments?
A: Yes, it works for both borrowing scenarios (interest cost) and investment scenarios (interest earned).

Q4: What if the interest rate is 0%?
A: The interest amount will be $0, as no interest accrues on the principal.

Q5: Is this suitable for long-term calculations?
A: For long-term investments, compound interest calculations are more appropriate as they account for interest earned on interest.