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Interest rates are almost always annualized and cited in terms of APR or Annual Percentage Rate. If the APR is not cited, then it is implied. This makes it eas
by presto8 9y ago
Interest rates are almost always annualized and cited in terms of APR or Annual Percentage Rate. If the APR is not cited, then it is implied.
This makes it easier to compare loans even if they have different terms. The fine print will usually provide the daily interest rate, for example 2.00% APR is 2/365 = 0.005479% per day interest.
Often interest is compounded continuously in which case calculus can be used to compute the exact interest, but it ends up as a famous formula in investing, FV = PV * e^(R*T). In practice, it ends up being very close to daily compounding, but it allows banks to advertise an ever-so-slightly higher APY (annual percentage yield) which is why everybody does it this way for interest paid on deposit accounts.