# How to Calculate Simple Interest on a Per Diem Basis ••• Hemera Technologies/Photos.com/Getty Images
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Simple interest is determined by multiplying the principal by the interest rate by the period of time the principal was borrowed. To calculate simple interest per diem, you need to convert the annual rate to a daily rate. The simple interest formula does not account for the effects of interest compounding.

Divide the annual interest rate by 100 to convert to a decimal interest rate. For example, if the annual interest rate equals 1.46 percent, divide 1.46 by 100 to get 0.0146.

Divide the annual interest rate by 365 to find the daily interest rate. In this example, find the daily interest rate to be 0.00004.

Multiply the daily interest rate by the number of days over which interest occurs. In this example, if you want to calculate interest accruing for 7 days, multiply 0.00004 by 7 to get 0.00028.

Multiply the result by the amount on which the interest accrues to figure the simple interest on a per diem basis. Continuing with this example, if you want to calculate the simple interest accruing on \$340, multiply \$34,000 by 0.00028 to get \$9.52 in simple interest accrues.