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The Age of George III

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The Sinking Fund

During the period before the French Wars Pitt the Younger undertook a series of economic reforms. In 1786 he reintroduced a Sinking Fund using an idea first implemented by Walpole in the 1720s. The Sinking Fund required an annual investment of £1 million per annum invested at a compound interest, to underpin the national finances. Below is a hypothetical guide to how this fund would have built up over a five year period had interest been at 10% per annum and the £1 million had been invested every year.

Investment and interest £
Sum invested in 1786 1 000 000
Compound interest at 10%
100 000
Grand Total 1 100 000
Investment for 1787 1 000 000
Sub-total before interest 2 100 000
Interest
210 000
Grand total 2 310 000
Investment for 1788 1 000 000
Sub-total before interest 3 310 000
Interest
331 000
Grand total 3 641 000
Investment for 1789 1 000 000
Sub-total before interest 4 641 000
Interest
464 000
Grand total 5 105 000
Investment for 1790 1 000 000
Sub-total before interest 6 105 000
Interest
610 510
Grand total 6 715 610
Investment for 1791 1 000 000
Sub-total before interest 7 715 610
Interest
771 561
Grand total 8 487 171

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Last modified 12 January, 2016

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