Presentation on theme: "Earning Interest “Interesting Information about Earning Interest”"— Presentation transcript:
1Earning Interest“Interesting Information about Earning Interest”
2In This Lesson:Understand the difference between simple and compound interest.Practice calculating both simple and compound interest.Understand the difference between simple and compound interestPractice calculating both simple and compound interest
4Would You Rather……get a penny doubled every day for 30 days, or $10,000 every day?Penny$10,000Penny$10,000Day 1Day 16$.01$10,000$327.68$160,000Day 2$.02$20,000Day 17$655.36$170,000Day 3$.04$30,000Day 18$1,311$180,000Day 4$.08$40,000Day 19$2,621$190,000Day 5$.16$50,000Day 20$5,242$200,000Day 6$.32$60,000Day 21$10,485$210,000Day 7$.64$70,000Day 22$20,971$220,000Day 8$1.28$80,000Day 23$41,943$230,000Day 9$2.56$90,000Day 24$83,886$240,000Day 10$5.12$100,000Day 25$167,772$250,000Day 11$10.24$110,000Day 26$335,544$260,000Day 12$20.48$120,000Day 27$671,088$270,000Day 13$40.96$130,000Day 28$1,342,177$280,000Day 14$81.92$140,000Day 29$2,684,354$290,000Day 15$163.84$150,000Day 30$5,368,709$300,000
5Some Interest-ing Definitions Interest- the money you earn from a bank or credit union.Simple Interest- the extra money that you earn that is paid out in cash.Interest Rate the extra money you earn expressed as a percentage.Compound Interest the extra money that you earn from your bank or credit union when you leave all the money in your account.Principal the money that you put in (or deposit) to your account.
6Compound InterestCompound interest- is earning interest on interest. Water and Rocks Activity:Compound interest is earning interest on interest.This sand activity will illustrate earning interest on interest.- Get colored sand. The interest represents the colored sand. The plain sand is the principle.Pour in Regular Sand. Pour in a small amount of colored sand. This is the interest we earn in one month. For the second month we will add our plain sand to show we earn money on the principle + interest. Now add more colored sand- (more than previous). Then repeat. For 6 months.What would this look like if we had been illustrating simple interest and wit drawled the interest we earned every month.??- No colored sand and less full.Compound InterestSimple Interest
7Another View of Simple and Compound Interest $1000 deposited and left alone for 30 years at 5% interest. The Blue line represents monthly compound interest, the pink line represents simple interest.
8SIMPLE INTERESTCharlie is trying to save for 6 months to buy a new iPod that costs $110. He is going to deposit $10 every month into his credit union account, which will pay him 20% interest on what he deposits. He will withdraw the interest each month to pay for fun things that he likes to do with his friends—going to movies, renting video games, and eating pizza.$1000( )^3=
9B. Beginning balance for this month C. Money Charlie Deposits A: Deposit CycleB. Beginning balance for this monthC. Money Charlie DepositsD. New Balance (B)+(C)E. Interest RateF. Interest earned and paid out (D)x(E)G. Month Ending Balance Same as (D)11020%220433064085506012Total42
10Activity #2 Saving for an iPhone Jessica is saving for a IPhone that costs $110. She is going to invest $10 every month for 6 months at her local credit union at 20%. Since she is not withdrawing the interest she will earn money on her interest.Look at the header for hints.
11Deposit CycleBeginning Balance for this month GMoney Jessica DepositsNew BalanceB+CRate of InterestInterest Earned and left in account DxEEnding Balance(D) + (F)1$101020%212224.4026.40336.407.2843.68453.6810.7464.42574.4214.8889.30699.3019.86119.16Total59.16Add this to the flip cart so students can come up and write this down.Cover line 1 together and line 2 if you can.
12What You’ve Learned:Understand the difference between simple and compound interest.Practice calculating both simple and compound interest.