How do I calculate bank' daily interest ?

[tim123]

What? Huh?

Firstly, 606 * (4/100) * (1/365) = 0.066411... = 6.6 pence

But if you charged £6.66 pence interest for 100 days then you would actually be charging slightly higher than 4% since you are not accounting for compounding.

ittony is correct in saying 1.04 ^ (1 / 365) is the daily interest rate. (=1.000107)

So if you want to work out the interest payable on x days on £606 then it is:

606 * (1.000107)^x - 606

100 days is £6.55.

You don't need to account for daily compounding.

Bank interest is calculated as simple interest throughout the year and componded annually.

Whilst the Banks calculate the interest daily (to allow for each day's balance being different), they only add these calculated amounts to the principle at the year end. They don't add it daily and compound it.

tim

[ittony]

No, that the compounding equation.

It doesn't calculate what the OP has asked. (try it and see)

Yes it does.

I don't need to try it thanks, I know it's right.

[BlasterBates]

You need to check how often the interest payment is made this maybe annual, bi-annual or quarterly. They don't pay out on a daily basis. However if you move money in or out the calculation could be based on a number of conventions, however it is usual I think that in the UK it is actual/365.

[oraclesmith]

How do I figure what kind of interest I get daily on 606 ponds.

Pooling your resources eh?

Is it a River Bank ? Do they have local branches ?

[tim123]

Yes it does.

No it doesn't (even if I let you off the missing "-1" at the end)

One days interest on 1000 pounds at 4% is

0.10958904109589041095890410958904

and 2 days is:

0.21917808219178082191780821917808 (note this is twice 1 day's interest)

Your equation generates:

0.10745978202790255193483447623945

and 2 days

0.21493111166055858819796605301335 (which is not twice 1 days.)

Bank interest IS NOT compounded daily, which is what your equation calculates.

tim