Simple explanation of how carbon dating works
When you have a growing thing, which creates more growing things, which creates more growing things… The most basic type is period-over-period return, which usually means “year over year”.Reinvesting our interest annually looks like this: We earn from year 0 – 1, just like with simple interest.There really isn’t an APR vs APY distinction, since your earnings can’t change: you always earn the same amount per year. I think of it as a type of “speed”: But both types of speed have a subtlety: we don’t have to wait the full time period! You could drive 15 minutes and go 12.5 miles (50 mph * .25 hours). If you have 0 at a 50% simple interest rate, your pace is /year.Most interest explanations stop there: here’s the formula, now get on your merry way. But you don’t need to follow that pace for a full year!No need to hit a mosquito with the calculus sledgehammer just yet.) Simple interest should make you squirm. We should use the bond payouts (/year) to buy more bonds.
(The math gurus will call this trajectory a “derivative” or “gradient”.However, this new, green money is stagnant — it can’t grow! Only the original 0 can do “work” to generate money.Simple interest has a simple formula: Every period you earn P * r (principal * interest rate).Let’s start on the ground floor: Simple interest pays a fixed amount over time.A few examples: Simple interest is the most basic type of return.
Interest rates are confusing, despite their ubiquity.