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bateati

Compound interest I love it,, I love it,,,, I love it ,,,,,,,,

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bateati
, Sep 27th, 2010 at 07:47 PM (637 Views)
You're walking down the street and some mysterious stranger offers you a proposition: He'll give you either a million dollars, or a penny that doubles every day for a month. You think, "Hey, my mom didn't raise no fool! Give me the cool million upfront."




Sorry, but you should have taken the penny. Because at the end of 30 days, you'd have $5,368,709.12. That's a little more than one million dollars, no?
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  1. MJ DeMarco's Avatar
    Ha, I have that example in my book but to demonstrate the futility of compound interest at low numbers versus big numbers.
  2. FDJustin's Avatar
    Ah, very similar to a lesson I saw in grade school. The lesson was actually about estimating... And being careful how you estimate. Some kid was asking for a job and asked to be paid a penny a day that doubles, instead of standard wage. In the example, the guy estimated too short and was thrilled with all the money he would save not paying regular wage.

    Hmm. I guess there was a hidden lesson about not -paying- compound interest! On that note, if you can find anyone that offers a 100% compound interest plan, I have $10 I'd like to lend them.

    A few years later, remembering this work (all school work should be done like that, it's so much more memorable).. When the teacher asked the class if they would prefer a million or the penny a day doubled, I was one of a handful that raised their hand for the penny.