Here is a step-by-step tutorial on how to calculate daily compound interest:
1. First, you need to know the annual interest rate and the number of times the interest is compounded per year.
2. Divide the annual interest rate by the number of times the interest is compounded per year to get the periodic interest rate.
3. Add 1 to the periodic interest rate.
4. Raise the result from step 3 to the power of the number of times the interest is compounded per year.
5. Multiply the initial balance by the result from step 4 to get the compounded amount.
6. Subtract the initial balance from the compounded amount to get the interest earned.
Here's an example: Let's say you have an initial balance of $1000, an annual interest rate of 5%, and daily compounding. To calculate your daily compound interest:
1. The annual interest rate is 5%, and since we're compounding daily, we divide that by 365 (the number of days in a year) to get a daily periodic interest rate of 0.0137% (0.05 / 365).
2. Add 1 to the daily periodic interest rate: 1 + 0.000137 = 1.000137
3. Raise that result to the power of 365 (the number of days in a year): 1.000137^365 = 1.05127
4. Multiply that result by your initial balance: $1000 * 1.05127 = $1051.27
5. Subtract your initial balance from your compounded amount: $1051.27 - $1000 = $51.27
So, your daily compound interest is $51.27.
