By year 5, because of all of the interest on interest you are getting, your total interest payment
has increased from $10.50 in year 1 to $15.66 in year 5, a 49% increase in just 5 years! Notice
that your interest on the initial investment portion never changes. That’s always $10.50, but the
interest on interest portion always keeps growing.
It grows in part because you keep having more and more years of interest to get interest on, but
also the size of the most recent interest on interest payment never stops growing. For example,
we have seen it grow from $1.10 to $1.22 to $1.35 to $1.49, and it will continue to grow, and in
an exponential way, eventually becoming far bigger than the $10.50 in interest on the initial
investment portion.