What is 'e' and where does it come from?

Its called Euler's number but it can be said to be credited also to Bernoulli.
Hopefully you are aware of interest on loans from banks, if not, proceed to have a look on Wiki. In short, when you borrow money of someone, they charge you a small amount of money called interest.
So for example, if you have a 1 pound loan and the interest is 5% per year, then you have to pay back the original 1 and an extra 0.05 pounds in interest.
Now what if you paid that interest back in two 6 month periods rather than one 12 month one. That is, pay 2.5% percent twice at each 6 month period. In period 1 the loan would cost 1*(1.025)^2 in interest which is more expensive than before .. 1.50625. If you pay split the interest at n periods the formula for the cost of the loan is 1*(1+1/n)^n. Now what if they split the interest an infinite amount of times, how much would the loan cost. In others what happens to (1+1/n)^n as n goes to infinity. You may have guessed that we get e!

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Answered by Oliver O. Maths tutor

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