Daily Compound Interest Formula

About Daily Compound Interest Formula

In compound interest, each period's interest is computed using the preceding period's amount. This signifies that the previous period's principle becomes the current period's principal. Adding interest to the current principal amount is known as compounding.

Define Daily Compound Interest Formula:

Because the interest is calculated 365 times per year in the daily compound interest formula, the value of n is 365. The daily compound interest formula, according to the explanation, is:

A = P (1 + r / n)nt

Here, P is principal amount, r is interest rate, t is time (years), n is the number of times amount is compounding.

When an amount multiplies daily, it does so 365 times per year. i.e., n = 365.

Here, A is total amount (A = Principal + Interest).

Example: You've put $1,000 in a bank account, where the interest is compounded everyday at a rate of 5%. So, how much do you get after ten years? Use the daily compound interest formula to figure it out.

Sol: To find the amount after 10 years.

The principal amount is, P = $1000.

The rate of interest is, r = 5% =5/100 = 0.05.

The time in years is, t = 10.

Using the daily compound interest formula is:

A = P (1 + r / 365)365 t

A = 1000 ( 1+ 0.05/365)365×10

A =$1648.66

Answer: The amount after 10 years = $1648.66.

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Daily Compound Interest Formula

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