Question 1

Does daily compounding mean interest is paid every day?

Accepted Answer

Not always. Many accounts accrue interest daily but pay it into the account monthly, which gives almost the same result.

Question 2

What is the difference between APR and APY?

Accepted Answer

APR is the nominal yearly rate; APY (or EAR) includes the effect of compounding. At 5% compounded daily, APY is 5.127%.

Question 3

How do I compound for a whole year without contributions?

Accepted Answer

Multiply the deposit by (1 + rate ÷ 365)³⁶⁵. For $10,000 at 5% that is about $10,512.67.

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