Recently I took a question from a maths GCSE paper:
Q: If I borrow £400 and pay back compound interest at 5% who much interest do I pay over three years?
A: £400 x 1.05 cubed = £463.05
Interest over 3 years = £63.05
The formula works and I have no difficulty applying it, but I don't fully understand how it works. To me it's abstract, a foreign language. Attempts to translate it into words fail me. Compound interest (or exponential growth) is difficult for me visualise - growth on growth - it's too much for my mind to encompass.
I was quite fascinated though. What does 1.05 cubed actually represent? When I tried to convert it into 400 + 5% and then cubed it (i.e. 420 x 420 x 420) I knew the answer would be too large, even before I tried to calculate it. I was on the wrong track. Then I googled 'order of operations'. Apparently if there is anything to be cubed it has to be done first before progressing with the rest of the calculation. 1.05 cubed only seems to have meaning in relation to £400 in the sense that it's a multiplier - my intuitive understanding is that this formula represents the trajectory of exponential growth. But that's as far as I got.
How can exponential growth be represented visually? A graph might work but I wonder whether other senses could be involved? A plane taking off came to mind - not only can you see it climb but you also hear the noise increase - the plane goes faster and faster and the sound becomes louder and louder.