Compound interest calculations
Lesson details
Learning outcome
I can carry out compound interest calculations.
Key learning points
- Compound interest is recalculated at each stage.
- By considering the calculations for compound interest, you can be more efficient.
- Through understanding the structure, you can reverse the calculations to find the original amount.
- Calculators are very useful here as they can be programmed efficiently.
Keywords
Compound interest - Compound interest is the interest calculated on the original amount and the interest accumulated over the previous period.
Common misconception
Failing to understand the difference between simple and compound interest. And, therefore finding the interest for one time period and multiplying it by the number of time periods.
Pupils can forget to transfer the year end balance as the starting balance of the next year. Using repeated language can help. E.g. "At the end of year 2 there was ... in the account, so, at the beginning of year 3 there was ... in the account."
Teacher tip
Highlighting the difference between simple and compound interest, could be demonstrated using the pupils. Using a corridor or outside space. 2 pupils stand a distance apart, the next student stands 50% farther, etc. Another set of pupils each stand the same distance apart, then compare the lines.
Licence
except where otherwise stated. See Oak's terms & conditions (Collection 2).Lesson video
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Prior knowledge starter quiz
6 Questions
Q1.What is the amount of simple 5% interest earned on an investment of £400 over 8 years?
Q2.If I invest £800 over 6 years at 1.6% interest, I have £876.80. Is this simple or compound interest?
Q3.What is the amount of simple 1.5% interest earned on an investment of £500 over 9 years?
Q4.If I invest £900 over 6 years at 1.6% interest, I have £989.93. Is this simple or compound interest?
Q5.What is the amount of compound 3% interest earned on an investment of £1500 over 3 years?
Q6.What is the amount of simple 3% interest earned on an investment of £10 000 over 4 years?
Assessment exit quiz
6 Questions
Q1.The cost of a game increases by 4% each month for 3 months. It now costs £44.99. What was the original price?
Q2.The cost of a phone contract increases by 3% each month for 3 months. It now costs £60.10. What was the original price?
Q3.The cost of a phone contract increases by 1.6% each month for 13 months. It now costs £59. What was the original price?
Q4.The cost of a streaming service increases by 1.7% each month for 16 months. It now costs £16.50. What was the original price?
Q5.The cost of a music subscription increases by 1.9% each month for 8 months. It now costs £11.16. What was the original price?
Q6.For an investment of £9.60 earning 1.9% interest per year for 8 years, how much more money would be gained using compound rather than simple interest?
To help you plan your 10 maths lesson on: Compound interest calculations, download all teaching resources for free and adapt to suit your pupils' needs...
To help you plan your 10 maths lesson on: Compound interest calculations, download all teaching resources for free and adapt to suit your pupils' needs.
The starter quiz will activate and check your pupils' prior knowledge, with versions available both with and without answers in PDF format.
We use learning cycles to break down learning into key concepts or ideas linked to the learning outcome. Each learning cycle features explanations with checks for understanding and practice tasks with feedback. All of this is found in our slide decks, ready for you to download and edit. The practice tasks are also available as printable worksheets and some lessons have additional materials with extra material you might need for teaching the lesson.
The assessment exit quiz will test your pupils' understanding of the key learning points.
Our video is a tool for planning, showing how other teachers might teach the lesson, offering helpful tips, modelled explanations and inspiration for your own delivery in the classroom. Plus, you can set it as homework or revision for pupils and keep their learning on track by sharing an online pupil version of this lesson.
Explore more key stage 4 maths lessons from the Percentages unit, dive into the full secondary maths curriculum, or learn more about lesson planning.