Question

What does it mean if interest is compounded daily?

Answer 1

Compond interest compounded daily:

Daily compound interest means interest is calculated on a daily basis. The per annum interest rate is divided by the number of days.

Formula: $\mathit{A}\mathbf{=}\mathit{P}{\left(1+\frac{r}{365}\right)}^{\mathbf{365}\mathbf{·}\mathbf{t}}\mathbf{-}\mathit{P}$

Here,

$A=$ Total amount after daily compounded interest is applied

$P=$ Initial amount

$r=$ The annual rate of interest

$t=$ Time period

Interest is compounded daily means the interest is accumulated on daily basis on the principal and the interest that is accumulated up to the previous day.

Hence,the meaning of interest compunded daily is explained.