How to Figure Interest Compounded Daily on a Savings Account

How often interest compounds tells the account holder how often the interest that has accrued on the account gets added to the account balance. The more often the interest accrues, the more interest will be added to the account. To find how much interest accrues when the interest compounds daily, you need to know the account balance and the number of days you will be leaving the money in the account.

Things You'll Need

• Calculator

Instructions

1. Divide your annual interest rate expressed as a percentage by 100 to find the annual rate expressed as decimal. For example, if the annual rate equals 2.993 percent, you would divide 2.993 by 100 to get 0.02993.

2. Divide the annual rate expressed as a decimal by 365 to find the daily interest rate. In this example, you would divide 0.02993 by 365 to get 0.000082.

3. Add 1 to the daily interest rate. Continuing the example, you would add 1 to 0.000082 to get 1.000082.

4. Raise the result from Step 3 to the power of the number of days that interest will accrue on the account. For example, if you wanted to find the interest you would earn after 100 days, you would raise 1.000082 to the 100th power to get 1.008233373.

5. Subtract 1 from the Step 4 result. In this example, you would subtract 1 from 1.008233373 to get 0.008233373.

6. Multiply the Step 5 result by the original balance of the account to find the amount of interest you would earn. Finishing the example, if you started with $1,800 in the account, you would multiply 0.008233373 by $1,800 to get $14.82 in interest.

References

• University of Arizona: Compound Interest and APY
• DePaul University: Compound Interest Formula