1. What is Daily Interest From AER?

The daily interest rate is derived from the Annual Equivalent Rate (AER), which represents the interest rate including compound interest over a year. Converting AER to a daily rate helps understand how interest compounds on a daily basis.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• AER — Annual Equivalent Rate (in decimal form, e.g., 5% = 0.05)
• 365 — Number of days in a year (for daily compounding)

Explanation: The formula converts the annual rate to a daily rate by taking the 365th root of (1 + AER) and subtracting 1.

3. Importance of Daily Rate Calculation

Details: Understanding the daily rate is crucial for financial planning, comparing investment products, and calculating exact interest accrual over short periods.

4. Using the Calculator

Tips: Enter the AER as a percentage (e.g., enter "5" for 5%). The calculator will provide both the percentage and decimal forms of the daily rate.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between AER and APR?
A: AER includes compound interest while APR typically doesn't. AER shows the actual annual return when compounding is considered.

Q2: Does this calculator account for leap years?
A: No, it uses 365 days for simplicity. For precise calculations over leap years, some institutions use 366 days.

Q3: Can I use this for monthly compounding?
A: No, this specifically calculates daily compounding. For monthly, you'd use (1 + AER)^(1/12) - 1.

Q4: Why is my daily rate so small?
A: Daily rates are fractions of the annual rate. A 5% AER gives about 0.0134% daily, which compounds to 5% over a year.

Q5: How accurate is this calculation?
A: Very accurate for standard compounding. Some financial products may use slightly different methods.