# Calculate the daily compounding interest of a $1575 loan

**Question**

How would you calculate this question to get the total interest earned?

Principal: $1575

Interest rate: 0.75%

Time invested: 85 days

Compounding frequency: Daily

**Answer**

**STEP 1: ** You are required to calculate the amount of interest obtained by daily compounding. The formula used for

finding compound interest is:

Here,

*P* denotes the principal,

*r* represents the annual interest rate,

*n* is the number of times the interest is compounded per year, and

*t* is the time in years.

**STEP 2: **The rate of interest is 0.75% per year. Before beginning the calculations, you need to express 0.75% as an equivalent decimal number. This can be achieved by dividing 0.75 by 100.

**STEP 3:** The time invested is 85 days. It is a known fact that a year consists of 365 days. If we divide 85 days by 365 days, we get the equivalent number of years.

**STEP 4: **Since the interest is being compounded daily, you can take n as 365. Now that all the variable values are known, you can directly substitute them in the formula and get the result.

The interest earned after 85 days by daily compounding is about $1577.75 - $1575 =

**$2.75**.