How to Calculate Daily Compounding Interest

Compounding interest daily increases your effective rate of return.
••• Monkey Business Images/Monkey Business/Getty Images

Daily compounding interest refers to when an account adds the interest accrued at the end of each day to the account balance so that it can earn additional interest the next day and even more the next day, and so on. To calculate daily compounding interest, divide the annual interest rate by 365 to calculate the daily rate. Add 1 and raise the result to the number of days interest accrues. Subtract 1 from the result and multiply by the initial balance to calculate the interest earned.

Formula Example

Pretend an account offers 3.65 percent interest per year, compounded daily, and you put $2,500 in the account. Divide 0.0365 by 365 to get 0.0001. Add 1 to 0.0001 to get 1.0001. Raise 1.0001 to the 365th power to get 1.037172411. Subtract 1 from 1.037172411 to get 0.037172411. Finally, multiply 0.037172411 by $2,500 to get $92.93 in interest.

Related Articles

How to Calculate Cost Increase by a Percent
How to Find Mass in Weight
How to Calculate Reverse Percentage
How to Calculate Percent of Return
How to Convert the Julian Date to a Calender Date
What is the Simple Interest Formula?
How to Calculate the Jump Height From Acceleration
How to Calculate CEUs
How to Calculate Percentage Decrease on a Calculator
How to Calculate 2/3 of a Number
How to Calculate a Test Average
How to Calculate Remaining Percentage
How do I Calculate 0.1%?
How to Convert a Mean Score to a Percentage
How to Calculate Percentage Reduction
How to Calculate the Grand Mean
How to Calculate Yearly Averages
How to Figure the Percentage of Change
How to Calculate Volume of a Circular Cylinder
How to Calculate a Cumulative Numerical Average