With time and population growth, you didn't need to be able to do compound interest; you just had to be able to count.
In a classroom environment, were taught about compound interest, mortgages, and debt.
The magic of compound interest means that it's always hard to make up for lost time.
|compound interest |
Interest computed on the original principal plus any accrued interest. Thus if 5% is the rate of interest per year and the principal is $1000, the compound amount after one year will be $1050, after two years it will be $1050 × 0.05 = $1102.50, after three years it will be $1102.50 × 0.05 = $1157.63, and so forth. Mathematically, if P is the original principal and I the rate of interest expressed as a decimal, the compound amount at the end of the nth year will be P(1 + I)n. The growth of the compound amount is exponential and not linear. Compare simple interest.