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. |