What is the difference between daily and monthly compounding for a nominal interest rate of 11.6% per annum?

The difference between daily and monthly compounding lies in the frequency of applying the interest to the principal amount.

1. Monthly Compounding: In this case, the interest is applied to the principal amount once a month. So, if you have a nominal interest rate of 11.6% per annum, it would be divided by 12 to get the monthly interest rate. This interest rate is then applied to the principal amount at the end of each month.

2. Daily Compounding: In this case, the interest is applied to the principal amount every day. So, the nominal interest rate of 11.6% per annum would be divided by 365 to get the daily interest rate. This interest rate is then applied to the principal amount at the end of each day.

The main difference between the two is that with daily compounding, you earn interest on the interest more frequently. This means that you would end up with a slightly higher amount at the end of the year with daily compounding compared to monthly compounding, assuming the same nominal interest rate and initial principal amount.