Calculating compound interest rates
Lesson details
Learning outcome
I can calculate compound interest rates given start and end values.
Key learning points
- If the compound interest rate is fixed but unknown, you can calculate it.
- To calculate it you need to know the start and end values, as well as the period of time.
- The interest rate is interpreted based on the period of time.
- The period of time could be per day/week/month/year etc.
Keywords
Rate of interest - The rate of interest is the percentage by which an amount increases.
Compound interest - Compound interest is the interest calculated on the original amount and the interest accumulated over the previous period.
Exponential form - When a number is multiplied by itself multiple times, it can be written more simply in exponential form.
Common misconception
When using multipliers, pupils can mistake a decimal for the percentage decrease. e.g. 0.52 is a 52% decrease, rather than recognising a 48% decrease.
Reminding students that a decimal multiplier greater than 1 means an increase, and a decimal multiplier less than 1 means a decrease. The latter requires a subtraction from 1 or 100%.
Teacher tip
As an alternative to going through where the compound interest formula comes from in the second learning cycle, give the pupils the formula and in pairs or groups discuss the formula and explain how it links to the calculations they have been doing in the first learning cycle.
Licence
Lesson video
Loading...
Prior knowledge starter quiz
6 Questions
Q1.Which statement is the equivalent of "Decrease 900 by 21%"?
Q2.If I increase £45 to £54, what is the percentage gain?
Q3.What is the amount of simple 1.8% interest earned on an investment of £12 000 over 3 years?
Q4.What is the amount of compound 1.6% interest earned on an investment of £1900 over 9 years?
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.What is the amount of simple 2.5% interest earned on an investment of £15 000 over 5 years?
Assessment exit quiz
6 Questions
Q1.The value of a car depreciates by 4% each year. If the car is worth £10 000 when purchased, how much is it worth after 3 years?
Q2.The value of a poor investment depreciates by 25% each year. If the investment was worth £30 000 when purchased how much is it worth after 3 years?
Q3.The value of a poor investment depreciates by 8% each year. If the investment was worth £20 000 when purchased how much is it worth after 3 years?
Q4.A good investment gains value by 12% each year. If the investment was worth £20 000 when purchased, how much is it worth after 3 years?
Q5.The value of a car is £8671.80 after 4 years of ownership. It was bought for £10 000. What is the percentage decrease per year?
Q6.The value of a poor investment is £18 544.33 after 5 years of ownership. It was bought for £20 000. What is the percentage decrease in value per year?
To help you plan your 10 maths lesson on: Calculating compound interest rates, download all teaching resources for free and adapt to suit your pupils' needs...
To help you plan your 10 maths lesson on: Calculating compound interest rates, 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.