Simple vs. Compound Interest: Power of Compounding
Activity Description
The main goal of this worksheet is to help students understand the impact of compounding. Through a graphical method, they will learn the difference between simple and compound interest. Students are given a scenario where they can invest the $10,000 they have in hand in either a bank with 10% simple interest or a bank with 8% compound interest. They are also given the option to adjust the duration of the deposit. As the investment duration increases, they will grasp the effect of compounding. Students need to comprehend these concepts since they play a significant role in personal finance decisions.
Students will utilize interactive controls, such as sliders, to interact with the worksheet. By adjusting the "Years" slider, they can observe the simple and compound interest graphs updating, along with the interest values changing.
Additionally, students will be required to record interest values for various specified years, as illustrated in the table below.
Moreover, students will address several questions designed to reinforce their comprehension.
Learning Objective
In this worksheet activity, students are investing $10,000. They're given two options - a bank offering a 10% interest rate (Simple Interest), and another offering an 8% interest rate but computed using a compounding method. Students will find the interest earned using both schemes for different years deposited. They will understand that the interest that can be earned from the compounding method is much higher when the investment duration is longer. Here is how the interactive worksheet looks like -
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