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This article was co-written by Michael R. Lewis. Michael R. Lewis is a retired Texas executive, entrepreneur and investment advisor. He has over 40 years of experience in Business & Finance, including the position of Vice President of Blue Cross Blue Shield of Texas. He holds a BBA in Industrial Management from the University of Texas at Austin.
This article has been viewed 27,748 times.
Knowing how to calculate interest each day is very helpful for calculating how much you earn or pay on loan payments. The daily interest calculation method is also widely used in business, such as to calculate the interest payable from customers or suppliers. Calculating returns in personal finance can help you estimate the cost of closing a mortgage or evaluating options for saving and investing. Here’s how to correctly calculate daily interest for a number of different apps.
Steps
Calculate daily interest by calculator
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Gather the information needed to calculate interest. Required information includes the amount you will invest or save, the term and the suggested interest rate. You can have more variables if you want to compare many different options. [1] X Research Source
- You will have to do a separate math for each option to be able to compare.
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Start the spreadsheet application on your computer to calculate the interest rate. You need to enter the data from Step 1 into specific cells on the spreadsheet and then make a formula. Once you have a formula, you can easily evaluate a variety of options. [2] X Research Source
- Popular spreadsheet programs are Microsoft Excel and iWork Numbers.
- You can also find free spreadsheet apps online like Google Docs or Zoho Sheet.
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Label rows 1-4 of column A, Capital, Interest, Term, and Daily Interest, respectively. You can expand the cell by clicking the line to the right of the column number, A, B, or C, etc. (the arrow indicates you can perform the operation.) But this label is for your reference only. [3] X Research Sources
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Enter the specific data in rows 1-3 of column B to match the labels in column A. Convert the percentage interest rate to decimal by dividing the percentage rate by 100. Leave cell B4 blank for now. (Earnings per day). [4] X Research Sources
- Interest is usually calculated on an annual basis; so to get the daily rate you need to divide the annual rate by 365.
- For example, if your investment is $10,000, and this savings earns an interest rate of 0.5%, you would enter “100000” in cell B1 and enter “=0.005/365” in cell B2.
- The term determines how long your investment is left untouched, except for the added interest accrued. In this example, we will use one-year tenor, so cell B3 will be entered “365”.
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In cell B4, create a function to calculate the daily interest at the annual rate. This function is a special formula provided by the spreadsheet designer to make your calculations easier. To create a function, first click on cell B4 to select it and then click inside the formula bar. [5] X Research Sources
- Type “=IPMT(B2,1,1,-B1)” in the formula bar. And then press the Enter key.
- The daily interest earned on the above capital, for the first month, is $1,370/day.
Calculate daily interest manually
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Gather the details needed to calculate interest. The required data includes the amount you will invest or save, the maturity of the investment or savings, and the suggested interest rate. You may need several different interest rates if you want to compare multiple options.
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Convert interest rate from percentage to decimal. Divide the percentage by 100, then divide this by the number of days in the year, 365 days. The result is the interest rate to replace the formula.
- The annual percentage rate of 0.5% or 0.005, divided by 365, is 0.00137%, or 0.0000137.
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Multiply the principal amount by the daily interest rate. Also take the data from the example in Step 1, the principal is 10,000 USD, multiplied by 0.0000137, we get 0.1370 USD. After rounding, your profit is about 0.14 USD/day.
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Double check your calculation. Take the principal amount, $10,000, multiply it by the annual interest rate as a percentage of 0.5% or 0.005 to calculate the interest manually. The result is 50 USD. Meanwhile, you take the daily interest of $0.1370 multiplied by 365 days; also get a result of 50 USD.
Calculate daily accrued interest
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Collect necessary information. Unless you withdraw your accrued interest daily, it will accrue to your principal, which is a great way to save. To calculate accrued interest, you need the principal amount, the annual interest rate, the number of compounding cycles per year (365 days) and the term of your deposit. [6] X Research Source
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Open your favorite spreadsheet, such as Microsoft Excel. Label rows 1-5 in column A as Principal, Interest, Term, Years, and Accrued Interest Balance, respectively. You can expand the cell by clicking on the line to the right of the column number, A, B, C, etc. (the arrow indicates that you can perform the operation). Note: these labels are for reference only. [7] X Research Sources
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Enter the details for the calculation in rows 1-4 of column B, matching the side labels. The term is 365 and the number of years is the number of years you want to calculate. Temporarily leave cell B5 blank (cell Accumulated interest balance). [8] X Research Sources
- For example, capital = $2,000, interest rate = 8% or 0.08, term = 365 and number of years is 5.
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Click on cell B5 to select the cell and then click inside the formula bar to enter this formula: =B1*(1+B2/B3)^(B4*B3) and press Enter. Total daily principal and interest is 2,983.52 USD after 5 years. Here it can be seen that reinvesting the earned profits is a very good idea. [9] X Research Source
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Calculate accrued interest manually. Apply the formula: Initial investment amount * (1 + Annual interest rate / Cumulative term in a year) ^ (Number of years * Cumulative term in a year). The ^ sign here is an exponent.
- For example, using the data from the example in Step 3, principal investment: $2,000, interest rate: 8% or 0.08, cumulative term: 365 and number of years: 5. Cumulative interest =2,000 * (1 + .08/365) ^ (5 * 365) = 2,983.52 USD.
Advice
- You can use the IPMT function to determine the daily interest on a mortgage. For example, if you sell your house in the middle of the month, your final balance will change every day. Daily interest amount can tell exactly how much your balance is.
- You can also use the IPMT function to determine the daily interest on a customer’s late payment.
Warning
- Each country, or each region, state (for the US) has different regulations on interest rate limits and on accrued interest. Therefore, when applying it to your business, you need to carefully and fully study all the laws of the region or state in which you do business before setting up and incorporating policies to calculate interest rates for businesses. late payment.
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This article was co-written by Michael R. Lewis. Michael R. Lewis is a retired Texas executive, entrepreneur and investment advisor. He has over 40 years of experience in Business & Finance, including the position of Vice President of Blue Cross Blue Shield of Texas. He holds a BBA in Industrial Management from the University of Texas at Austin.
This article has been viewed 27,748 times.
Knowing how to calculate interest each day is very helpful for calculating how much you earn or pay on loan payments. The daily interest calculation method is also widely used in business, such as to calculate the interest payable from customers or suppliers. Calculating returns in personal finance can help you estimate the cost of closing a mortgage or evaluating options for saving and investing. Here’s how to correctly calculate daily interest for a number of different apps.
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