Thursday, June 23, 2011

French Fries and Compound Interest

An article in my local paper today (reprinted from the LA Times) talks about how much weight the average person puts on per year from eating potatoes.  Why is this relevant to a finance blog you ask?  Well, the article states that:

The research team calculated that participants gained an average of 0.8 pound a year...It may not sound like much, but as the years go by "it becomes like compounded interest," adding up to 16 pounds over 20 years, said Dr. Jeffrey Schwimmer  (emphasis added)
I hate to be a boring finance pedant, but actually that is like simple interest, not compound interest.  If eating french fries was like compound interest - then the amount of weight you'd put on would be a function of your existing weight.