Compound interest calculations with technology | Maths

Starter quiz

Heidi has calculated that £50 saved for 3 years with 3% compound interest would return £54.63. What mistake has she made?

She has calculated simple interest.

She has calculated 4 years not 3.

She has not rounded correctly. ✓
What is the amount of simple 1.9% interest earned on an investment of £900 over 4 years?

'68.40' ✓
The cost of a game increases by 3% each month for 3 months. It now costs £36.06. What was the original price?

£32

£33 ✓

£31
What is the amount of simple 2.7% interest earned on an investment of £25000 over 3 years?

'2025' ✓
What is the amount of compound 3% interest earned on an investment of £1800 over 2 years?

'109.62' ✓
What is the amount of simple 3.8% interest earned on an investment of £9000 over 3 years?

'1026' ✓

Exit quiz

What is the correct multiplier for compound interest over 5 years at 3.2%?

$1.032^5$ ✓

$5^{1.032}$

$1.16$
What is the correct multiplier for compound interest over 4 years at 1.5%?

$1.15^4$

$1.015^4$ ✓

$1.0015^4$
What is the correct multiplier for compound interest over 9 years at 0.7%?

$1.063^9$

$1.07^9$

$1.007^9$ ✓
What is the correct multiplier for compound interest over 5 years at 0.5%?

$1.05^5$

$1.005^5$ ✓

$1.5^{0.5}$
What is the correct multiplier for compound interest over 8 years at 8%?

$1.08^8$ ✓

$8^{1.08}$

$1.008^8$
What is the correct multiplier for compound interest over 12 years at 1.2%?

$1.012^{12}$ ✓

$1.0012^{12}$

$12^{1.2}$

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Lesson Details

Key learning points

Calculators are very useful here as they can be programmed efficiently.
This saves time and can reduce error.
It is also quick to reverse the process to find the original amount.
The use of a multiplier ensures greater efficiency.

Common misconception

A single digit percentage is incorrectly worked out by dividing by 10 and not 100 e.g 3% = 0.3. This error continues when increasing amounts e.g increase 40 by 3% has a multiplier of 1.3

Remind pupils that to covert a percentage into a decimal we divide by 100. This applies with increase too e.g 120% has a multiplier of 1.2

Keywords

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.