1. What is Daily CD Interest?

Daily interest on a Certificate of Deposit (CD) is the amount of interest earned each day based on your account balance and annual interest rate. Most CDs compound interest daily, meaning each day's interest is added to the principal for the next day's calculation.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( \text{Balance} \) — Current CD account balance in dollars
• \( \text{Interest Rate} \) — Annual percentage rate (APR)
• \( 365 \) — Number of days in a year (some banks use 360)

Explanation: The formula calculates the daily portion of your annual interest by dividing the yearly amount by 365 days.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps you compare CD offerings, project earnings, and make informed investment decisions. Daily compounding can significantly increase total returns over time.

4. Using the Calculator

Tips: Enter your CD balance in dollars and the annual interest rate in percentage (e.g., 2.5 for 2.5%). The calculator will show daily, monthly (approximate), and annual interest amounts.

5. Frequently Asked Questions (FAQ)

Q1: Do all CDs compound interest daily?
A: Most do, but terms vary by institution. Always check your CD's specific terms.

Q2: Why do some banks use 360 days instead of 365?
A: Some financial institutions use a 360-day year for simplicity, which results in slightly higher daily rates but fewer compounding periods.

Q3: How does compounding frequency affect earnings?
A: More frequent compounding (daily vs monthly) yields higher returns due to the "interest on interest" effect.

Q4: Is the monthly interest amount exact?
A: No, it's an approximation (30 days). Actual monthly amounts vary slightly due to different month lengths and compounding.

Q5: Are CD interest rates fixed?
A: Traditional CDs have fixed rates, but some special CDs may have variable rates. This calculator assumes a fixed rate.