Compound interest

During my grade 10 unit on exponents, right around the time a frustrated student asked, when am I ever going to use this!?, I promised to show my student how exponents can help them make money without doing anything. They were hooked!compound_interest_28english29

This is the magic of compound interest! Money saved (or invested) with compound interest grows exponentially. Likewise, money borrowed with compound interest results in debt that grows exponentially. If this is unfamiliar to you or your students, this primer on compound interest offers a great introduction.

In this open-ended task,  students explored compound interest. Specifically, students  selected a principal amount for a loan (or investment) and then did a bit of research to find a suitable interest rate. They also selected a reasonable term for the loan (or investment). Students then used the compound interest formula to determine how their debt (or investment) would grow if the interest was compounded annually, monthly, weekly or daily.

Mathematically, this task allowed students to practice calculations with exponents. Students also got to practice communicating mathematical information, and using graphs, equations and tables to convey information.

In terms of financial literacy, students explored the frequency of compounding, which is a small thing (often listed in the finest of fine print the terms of a loan, investment or bank account) that can make a big difference.


One thought on “Compound interest

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s