Compound interest is a powerful concept in finance, representing the "interest on interest" effect. When interest is compounded daily, it means that each day, the interest earned is added to the principal, and the next day's interest is calculated on this new, larger sum. This leads to accelerated growth compared to simple interest or interest compounded less frequently.
The formula for compound interest is typically given as:
A = P (1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
For a daily compound interest calculator, we set n = 365 (assuming 365 days in a year, ignoring leap years for simplicity in this common calculator model). The formula then becomes:
A = P (1 + r/365)^(365*t)
This calculator helps you visualize how your money can grow over time with daily compounding. It's a fundamental tool for understanding the potential of savings accounts, certificates of deposit (CDs), and other investments where interest accrues daily.
Use Cases:
Savings Growth Projection: Estimate the future value of your savings with daily interest accrual.
Investment Planning: Understand how different interest rates and timeframes impact your long-term investment goals.
Loan Amortization Visualization: While this calculator focuses on growth, the principle of daily compounding is also relevant in understanding how some loans accrue interest.
Financial Literacy: Educate yourself on the benefits of compounding and making sound financial decisions.
By inputting your initial principal, the annual interest rate, and the number of years, you can quickly see the potential future value of your investment, demonstrating the power of consistent growth through daily compounding.
function calculateInterest() {
var principal = parseFloat(document.getElementById("principal").value);
var annualRate = parseFloat(document.getElementById("annualRate").value);
var timeYears = parseFloat(document.getElementById("timeYears").value);
var resultDisplay = document.getElementById("result-value");
if (isNaN(principal) || isNaN(annualRate) || isNaN(timeYears) || principal <= 0 || annualRate < 0 || timeYears < 0) {
resultDisplay.innerHTML = "Invalid input. Please enter positive numbers.";
return;
}
var ratePerPeriod = annualRate / 100 / 365; // Daily rate
var numberOfPeriods = timeYears * 365; // Total number of days
var totalAmount = principal * Math.pow(1 + ratePerPeriod, numberOfPeriods);
// Format the output to two decimal places
resultDisplay.innerHTML = "$" + totalAmount.toFixed(2);
}