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Compound Interest Lesson Plan

Instructor: Dana Dance-Schissel

Dana teaches social sciences at the college level and English and psychology at the high school level. She has master's degrees in applied, clinical and community psychology.

Would your students be better off placing their savings in an account offering simple or compound interest? A video lesson explains these concepts and an activity allows for guided practice. Extensions and related lessons allow for ongoing study.

Learning Objectives

Upon completion of this lesson, students will be able to:

  • define 'interest'
  • distinguish between simple and compound interest
  • apply the formula to calculate compound interest

Length

1 hour

Materials

  • A worksheet with 50 compound interest problems listed

Curriculum Standards

  • CCSS.MATH.CONTENT.7.EE.A.1

Apply properties of operations as strategies to add, subtract, factor, and expand linear expressions with rational coefficients.

  • CCSS.MATH.CONTENT.7.EE.B.3

Solve multi-step real-life and mathematical problems posed with positive and negative rational numbers in any form (whole numbers, fractions, and decimals), using tools strategically. Apply properties of operations to calculate with numbers in any form; convert between forms as appropriate; and assess the reasonableness of answers using mental computation and estimation strategies. For example: If a woman making $25 an hour gets a 10% raise, she will make an additional 1/10 of her salary an hour, or $2.50, for a new salary of $27.50. If you want to place a towel bar 9 3/4 inches long in the center of a door that is 27 1/2 inches wide, you will need to place the bar about 9 inches from each edge; this estimate can be used as a check on the exact computation.

Key Vocabulary

  • Interest
  • Period
  • Simple interest
  • Principal
  • Compound interest

Formulas

  • A = P (1 + (r / n) )^nt

where A is the new balance, P is the principal, r is the interest rate percentage, n is the number of interest periods in a year, and t is the number of years the money stays in the account

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