In one of the site I saw for 1% interest rate daily compounded interest the APY interest rate is 1.005003 ! How is this calculated I google a lot and didnt find how it is calculated !

1 Answer 1


When speaking interest rates it is usually expressed in “per year”. However the method of compounding makes the actual interest rate a bit different.

Usually you will divide the interest rate with number of periods. In your case you get

1% / 365 = 0.00274% daily

This means that your annual actual interest rate will become

(1 + 0.00274%)^365 - 1 = 1.005%

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