chandsingh

Your #1 is simple interest (a discrete, day-by-day measurement), and your #2 is compound interest (althought I would guess you'd use 365 as the demoninator, unless it's a t-bill).

Honestly, sometimes you just have to know which to use in a given situation. I would hope if it's not defined by a formula (like for bonds and t-bills), you are told simple, compound, or continuous.