The Deadbeatometer

Since we're figuring 5% interest compounded annually, here's how we're calculating the current annual balance, with the help of The Compound Interest Formula, via The Calculator Site's Compound Interest Calculator:

The formula for annual compound interest is A = P (1 + r/n) ^ nt:

Where:

  • A = the future value of the loan, including interest
  • P = principal amount (the initial amount Paul borrowed) = $4,500
  • r = annual rate of interest (as a decimal) = .05
  • n = number of times the interest is compounded per year = 1
  • t = number of years for which the amount is borrowed = 50 (Actuarially, Paul won't live much past 2053)

P = 4500. r = 5/100 = 0.05 (decimal). n = 1. t = 50.

If we plug those figures into the formula, we get:

A = 4500 (1 + 0.05 / 1) ^ 1(50) = 51,603.30

So, the debt balance after 50 years is $51,603.30

See the annual breakdown below:

(interest compounded yearly - added at the end of each year)