1. What is Daily Interest Rate?

The daily interest rate is the interest charged or earned each day, calculated by dividing the annual percentage rate (APR) by 365 days. It's used to calculate daily interest charges on loans or daily earnings on investments.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( APR \) — Annual Percentage Rate (in percentage)
• \( 365 \) — Number of days in a year

Note: The result is converted from percentage to decimal form by dividing by 100.

3. Importance of Daily Rate Calculation

Details: Knowing the daily rate helps understand how interest compounds over time, compare different financial products, and calculate exact interest charges for partial periods.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern financial calculations use 365 days for daily rate calculations, though some institutions still use 360 days.

Q2: Is this the same as daily periodic rate?
A: Yes, the daily interest rate is also called the daily periodic rate.

Q3: How does compounding affect this?
A: This calculates the simple daily rate. For compound interest, you would use (1 + APR)^(1/365) - 1.

Q4: Can I use this for credit cards?
A: Yes, credit card interest is typically calculated using a daily rate derived from the APR.

Q5: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY (Annual Percentage Yield) does.