1. What Is Daily Interest Calculation From AER?

The Daily Interest Calculation from AER converts an Annual Equivalent Rate to a daily interest rate, allowing you to understand how interest compounds on a daily basis rather than annually.

2. How Does The Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( \text{AER} \) — Annual Equivalent Rate (as a decimal)
• \( 365 \) — Number of days in a year

Explanation: This formula calculates the daily compounding rate that would result in the given AER over one year when compounded daily.

3. Importance Of Daily Interest Calculation

Details: Understanding daily interest rates is crucial for comparing different financial products, calculating daily interest accrual, and understanding how compounding works on a daily basis for savings accounts, loans, and investments.

4. Using The Calculator

Tips: Enter the Annual Equivalent Rate (AER) as a percentage. The calculator will compute the equivalent daily interest rate. AER must be a non-negative value.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between AER and APR?
A: AER (Annual Equivalent Rate) shows the interest you'll earn on savings, while APR (Annual Percentage Rate) shows the cost of borrowing including fees and interest.

Q2: Why calculate daily interest from AER?
A: It helps you understand how your money grows daily and makes it easier to compare different savings accounts with daily compounding.

Q3: Is the daily rate the same for leap years?
A: For simplicity, most calculations use 365 days. Some institutions may use 365.25 for leap year adjustments.

Q4: Can I use this for monthly compounding?
A: No, this formula is specifically for daily compounding. For monthly compounding, you would use (1 + AER)^(1/12) - 1.

Q5: How accurate is this calculation?
A: Very accurate for standard financial calculations. The result shows the exact daily rate needed to achieve the given AER with daily compounding.