Here's a Very Old Debt

Check this out -- a very old debt indeed:

Heir to the throne Prince Charles on Tuesday paid off a family debt incurred more than 350 years ago -- but was spared the accumulated interest that could have run into tens of thousands of pounds.

Charles handed over 453 pounds and 15 pence (572 euros and 20 euro cents, 885 dollars and four cents) which King Charles II failed to pay to the Clothiers Company in Worcester, central England, in 1651.

If he had paid interest, how much would he have owed? The answer:

If interest was taken into account, 453 pounds and three shillings in 1651 would have been worth approximately 47,500 pounds in 2007, the BBC website said, citing the Institute for the Measurement of Worth.

About $93,000 by my calculations. Yikes! Just goes to show how even a small amount can grow big with enough time!

Comments

[Kevin]

I wonder if the Clothiers Co was still carrying that receivable on their books? (Sorry, only something a geeky accountant would ask.)

[Colin]

Makes me want to set up a dynasty trust for my great great great great grand children's education.

[Glen]

What about inflation? I'm fairly certain that 453 pounds in 1651 money is very different than 453 pounds in 2008 money.

[Glen]

Oh, and 885 dollars, compounded annually at 3%, would give a 'current' value of $33,871,348.74; not the $93,000 the OP suggests.

[FMF]

Glen --

It seemed low to me too, but I didn't have time to check their math.

[Kevin L.]

Inflation wouldn't matter on a loan. Otherwise all of our outstanding loans would need to be adjusted (upwards) every year.

[Jim]

They cited the Institute for the Measurement of Worth. I threw that into Google and got this website:
http://www.measuringworth.com/ppoweruk/
If you use their calculator then you get the same result of 47,500 pounds in 2007 dollars.

It is an inflation adjustment calculator. Not exactly the same as paying interest.

Jim

["Mo" Money]

This should give us an idea of what compounding will do for us.