Compound Interest

Presentation

•

Mathematics

•

10th Grade

•

Hard

Joseph Anderson

FREE Resource

4 Slides • 7 Questions

3.3.23 Introduction to Compound Interest

Ana is opening a new bank account with an amazing interest rate!

She deposits $100 and will earn 12% interest each year.

Situation

Math Response

Her interest is compounded (calculated and paid out) at the end of each year. How much money will she have after 1 year?

Type answer here

Deg^°

Rad

The last slide was an example of interest compounded annually – meaning Ana earns 12% interest once a year.

Compounded Annually

But real interest is compounded more than once a year! For example, compounding "semi-annually" would mean Ana could earn 6% twice a year.

Compounded Semi-Annually

Math Response

Calculate the amount Ana would have after a year if her interest were compounded semi-annually. (You need to multiply twice!)

Type answer here

Deg^°

Rad

Open Ended

If Ana has a choice between having interest compounded annually or semi-annually, which should she choose?

Type response here

Multiple Choice

Interest can also be compounded quarterly (meaning 4 times a year). If Ana's yearly interest is 12%, how much interest will she earn each quarter?

48%

Math Response

How much will Ana have after a year if her interest is compounded quarterly? Round to the nearest hundredth.

Type answer here

Deg^°

Rad

Most often, banks compound interest monthly (12 times a year).

This means that Ana would earn 1% interest each month.
After a year, her account would go up by a factor of (1.01)¹²

Compounding Monthly

Math Response

Calculate how much money Ana would have after 1 year if the interest were compounded monthly.

Type answer here

Deg^°

Rad

Open Ended

Ana notices that the more times interest is compounded, the more money she earns. Why do you think this is true?

Type response here

3.3.23 Introduction to Compound Interest

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