Compound interest is so amazing an investment concept that it’s been called the Eighth Wonder of the World. Credit for “Eighth Wonder” has been assigned to Benjamin Franklin (1706-1790), Baron Rothschild (1840-1915), Bernard Baruch (1870-1965) and Albert Einstein (1879-1955). There is no evidence that any of them said it.
The “Eighth Wonder of the World” definition of compound interest appeared in financial institution advertisements by 1965.
Wikipedia: Compound interest
Compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. The act of declaring interest to be principal is called compounding (i.e., interest is compounded). A loan, for example, may have its interest compounded every month: in this case, a loan with $100 principal and 1% interest per month would have a balance of $101 at the end of the first month.
Interest rates must be comparable in order to be useful, and in order to be comparable, the interest rate and the compounding frequency must be disclosed. Since most people think of rates as a yearly percentage, many governments require financial institutions to disclose a (notionally) comparable yearly interest rate on deposits or advances. Compound interest rates may be referred to as Annual Percentage Rate, Effective interest rate, Effective Annual Rate, and by other terms. When a fee is charged up front to obtain a loan, APR usually counts that cost as well as the compound interest in converting to the equivalent rate. These government requirements assist consumers to more easily compare the actual cost of borrowing.
Compound interest rates may be converted to allow for comparison: for any given interest rate and compounding frequency, an “equivalent” rate for a different compounding frequency exists.
Compound interest may be contrasted with simple interest, where interest is not added to the principal (there is no compounding). Compound interest predominates in finance and economics, and simple interest is used infrequently (although certain financial products may contain elements of simple interest).
Wikipedia: Wonders of the World
Various lists of the Wonders of the World have been compiled over the ages to catalogue the most spectacular man-made constructions and natural things in the world.
The Seven Wonders of the Ancient World is the first known list of the most remarkable man-made creations of classical antiquity, and was based on guide-books popular among Hellenic sight-seers and only includes works located around the Mediterranean rim. The number seven was chosen because the Greeks believed it to be the representation of perfection and plenty. Many similar lists have been made, including lists for the Medieval World and the Modern World.
7 November 1965, New York (NY) Times, pg. F12:
Do You Know
What Baron Rothschild
Eighth Wonder Of The World?
Compound Interest. Rothschild, one of the world’s richest bankers, was asked at a dinner party if he could name the Seven Wonders of the World. He said: “No, but I can tell you what the Eighth Wonder is. The Eighth Wonder should be utilized by all of us to accomplish what we want. It is compound interest.”
(Community Savings and Loan Association—ed.)
30 May 1967, Athens (OH) Messenger, pg. 7, col. 5 ad:
THE PYRAMIDS AT GIZA
One of the Seven Wonders of the World
BUT BERNARD BARUCH ADDED ANOTHER. HE CALLED COMPOUND INTEREST THE EIGHTH WONDER OF THE WORLD.
And no wonder. For instance, $10,000, compounded semi-annually at 5% for 10 years, will be worth $16,386.20.
(The Athens National Bank—ed.)
11 June 1967, New York (NY) Times, Q&A, pg. 318:
C.W. wants to know who made this statement and where: “Social security is based on what has been called the eighth wonder of the world—compound interest.”
13 May 1968, Wisconsin State Journal (Madison, WI), pg. 8, col. 5:
A financier is said to have remarked that compound interest is the eighth wonder of the world.
5 October 1976, Yuma (AZ) Daily Sun, pg. 10, col. 3 ad:
SOME LITTLE KNOWN FACTS ABOUT THE POWER OF COMPOUND INTEREST AT WESTERN.
The miracle multiplier. The eighth wonder of the world. The one, true enemy of gold. That’s what moneymen call compound interest. As a moneymaker it has no equal. The results can be awesome.
Inherit Your Own Money:
An Exciting New Concept in Retirement Planning
By Elmer Otte
New York, NY: David McKay Company
No wonder Baron de Rothschild is reputed to have called compound interest the eighth wonder of the world.
On Social Welfare
By Henry J. Aaron
Published by Abt Books
As one of the Rothschilds once said, “Compound interest is the eighth wonder of the world.”
Production and Operations Management:
A Life Cycle Approach
By Richard B. Chase and Nicholas J. Aquilano
Published by Irwin
Albert Einstein was once quoted as saying that compound interest is the eighth wonder of the world.
Compounding and Compound Interest Explained
© Kirk Lindstrom
Sep 10, 1999
Some believe it was Benjamin Franklin who said, “Compound interest is the eighth wonder of the world,” while attributing “Compound interest is the world’s greatest discovery,” to Albert Einstein. Still others attribute the whole thing to John Maynard Keynes. Whoever said it first, all three of these great minds recognized the power of compounding. It doesn’t take a “genius” to see why.
New York City • Banking/Finance/Insurance • (0) Comments • Friday, December 12, 2008 • Permalink