1. What is Daily Interest Rate?

The daily interest rate is the interest rate calculated on a daily basis, derived from the annual interest rate. It's commonly used in banking, investments, and loans where interest compounds daily.

2. How Does the Calculator Work?

The calculator uses the daily rate formula:

Where:

• \( Annual\ Rate \) — Annual interest rate in percentage
• \( 365 \) — Number of days in a year

Explanation: This formula converts the annual percentage rate to a daily decimal rate by dividing by 365 days.

3. Importance of Daily Rate Calculation

Details: Daily rate calculation is essential for accurate interest accrual in daily compounding scenarios, credit card interest calculations, short-term investments, and financial planning.

4. Using the Calculator

Tips: Enter the annual interest rate as a percentage (e.g., 5 for 5%). The calculator will return the daily rate in decimal format. All values must be valid (annual rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 is used for actual/actual day count convention, while 360 is used in some commercial loans. Most modern financial calculations use 365 days.

Q2: How is daily rate different from APR?
A: APR is the annual rate, while daily rate is the equivalent daily interest. Daily rate = APR ÷ 365.

Q3: When is daily rate calculation used?
A: Daily compounding accounts, credit card interest, daily interest loans, and short-term investment calculations.

Q4: What about leap years?
A: For precise calculations in leap years, use 366 days. However, most standard calculations use 365 days for consistency.

Q5: How do I convert daily rate back to annual?
A: Multiply daily rate by 365 to get the annual rate in decimal form, then multiply by 100 for percentage.