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Describe Compounding

A classic.

    1. One day a farmer is approached by someone looking to work

    2. When asked how much he wanted to be paid, the farmhand reached into his pack and produced a chessboard.

    3. You only have to pay me one cent today. Two cents tomorrow.

    4. As I get better at the work, we will double the number of cents on each square of the board. That way we can keep track.

    5. The farmer suspected a trick. “There are 64 squares on your board. I may not need 2 months work.”

    6. “Fair enough. Pay me as agreed for only 30 days. If you still need me we can start over.”

    7. “But please,” added the farm hand, “ I like to be paid at the end of every day”

    8. At the end of the first week, the farmer had paid a total of $1.27.

    9. By the end of the 2nd week, the farmer had paid $162.56. Still not bad for two weeks work.

    10. At this point, the farmer’s wife asked why he was being paid more each day.

    11. As the farmer began to explain, his wife grabbed the chessboard and smacked him over the head.

    12. She was heard to scream, “ By next week he’ll own the farm. I wish you knew as much about compounding as you do composting!!”

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