Daily Compound Interest Calculator

How to Calculate Daily Compound Interest

Understanding how to calculate daily compound interest is essential for evaluating investments and loans. This calculator helps you determine the future value of an investment or debt when interest is compounded daily.

Daily Compound Interest Formula

The formula for calculating daily compound interest is:

$$A = P(1 + \frac{r}{n})^{nt}$$

Where:

• A = Final amount
• P = Principal balance
• r = Annual interest rate (in decimal form)
• n = Number of times interest is compounded per year (365 for daily compounding)
• t = Number of years

Calculation Steps

1. Convert the annual interest rate to a decimal by dividing by 100.
2. Calculate the daily interest rate by dividing the annual rate by 365.
3. Convert the time period from days to years by dividing by 365.
4. Apply the formula to calculate the final amount.
5. Subtract the initial principal from the final amount to find the interest earned.

Example Calculation

Let's calculate the daily compound interest for an investment with the following terms:

• Principal (P) = $10,000
• Annual Interest Rate = 5%
• Time Period = 365 days (1 year)

Step 1: Convert annual interest rate to decimal

r = 5% ÷ 100 = 0.05

Step 2: Calculate daily interest rate

Daily rate = 0.05 ÷ 365 ≈ 0.000137

Step 3: Apply the formula

A = $10,000 × (1 + 0.000137)^365 ≈ $10,512.67

Step 4: Calculate interest earned

Interest Earned = $10,512.67 - $10,000 = $512.67

Final Results:

• Future Value: $10,512.67
• Interest Earned: $512.67

Visual Representation

This diagram illustrates how your investment grows over time with daily compound interest. The blue area represents the principal amount, which remains constant, while the green area shows the cumulative interest earned. The chart provides a visual representation of how compound interest accelerates growth over time.