Double Trouble
When I was eight, I wanted a toy and needed $10 to buy it. But, as usual, I was broken. I decided to ask my 11-year-old sister, Kathleen, for a loan. I went to her room, ____1____ her for the cash. Laughing, she agreed to ____2____ me the money, but added, “I will charge you 10 percent compound interest every ____3____ until you pay me back.”
“Compound interest---what’s that?” I asked.
“Well, interest is what you call the ____4____ money borrowers have to pay back on a loan,” she explained. “Compound interest means that the interest payments get bigger and bigger the ____5____ you take to pay back the loan. To repay the loan, you will need to give me 10 to 11. Then I will add that interest to the 12.10. That’s what you’ll owe after two months.”
“Sure. I get it,” I said. Though truthfully, I was getting ____6____.
Kathleen lent me the money, and I bought the toy. My birthday came a month later, and my mom gave me $10. ____7____, that was just the amount I needed to buy another toy I wanted ____8____. I put off paying my sister for a month. After another month, I ____9____ about the loan.
Several months later, on Christmas morning, my sister and I each found a $02 bill in our stockings. I was just putting it into my pocket ____10____ Kathleen tapped me on the shoulder.
“Sorry, kiddo. That’s mine. I’m ____11____ on your debt.”
“Huh?” Then I remembered the loan. “Hey! How can it be that much? I ____12____ borrowed $10.”
“True,” she said, “but interest has been compounding for eight months. Now you ____13____ me 1.43.”
I ____14____ to believe that a $10 loan could more than double so quickly. Much to my ____15____, my sister got her pencil and tablet and showed me exactly how it all added up.
My head ____16____ as I tried to keep track of Kathleen’s ____17____, but this time, I got the basic idea of compound interest. I ____18____ the hard way that borrowing money can be “double trouble” in no time.