Skip to content
Oak National Academy
Oak National Academy
Teachers
Pupils
New
New
Year 11
Higher

Checking and securing understanding of compound interest calculations

I can calculate compound interest.

Download all resources
arrow-right
Share activities with pupils
arrow-right
New
New
Year 11
Higher

Checking and securing understanding of compound interest calculations

I can calculate compound interest.

Download all resources
arrow-right
Share activities with pupils
arrow-right
warning

These resources will be removed by end of Summer Term 2025.

Switch to our new teaching resources now - designed by teachers and leading subject experts, and tested in classrooms.
View new resources
arrow-right

Lesson details

Key learning points

  1. Compound interest can be thought of as a geometric sequence
  2. You can apply your knowledge of geometric sequences to solve algebraic compound interest problems

Keywords

  • Simple interest - Interest is money added to savings or loans. Simple interest is always calculated on the original amount.

  • Compound interest - Compound interest is calculated on the original amount and the interest accumulated over the previous period.

Common misconception

Pupils get confused between simple interest and compound interest. When presented with a compound interest problem the common error is for pupils to add the same constant amount.

Visual representations are helpful here. The bar models in the first part of the lesson show how compound interest grows year on year. The graphical representation also demonstrates the fundamental difference between the two forms of interest.

In learning cycle 2, it is possible to be more efficient by not pressing the ANS key as the calculator will use the last calculated value due to the order of operations. Insistence on pressing the ANS key is to prepare pupils for iterative formulas where this is needed.
Teacher tip

Licence

This content is © Oak National Academy Limited (2024), licensed on Open Government Licence version 3.0 except where otherwise stated. See Oak's terms & conditions (Collection 2).

Lesson video

Skip lesson video

Loading...

Starter quiz

Download starter quiz

6 Questions

Q1.
When money is added to savings or loans it is called...
Correct answer: interest
gifting
donating
taxing
Q2.
$$12$$% of $$800$$ is . You may use a calculator.
Correct Answer: 96
Q3.
$$800$$ increased by $$12$$% is __________. You may use a calculator.
96
812
8.12
Correct answer: 896
960
Q4.
$$7\times7\times7\times7\times7$$ simplifies to...
$$35$$
$$7^7$$
Correct answer: $$7^5$$
$$5^7$$
$$2401$$
Q5.
Which of the below will affect an increase of $$2.5$$%?
$$\times2.5$$
$$\times1.25$$
Correct answer: $$\times1.025$$
$$\times0.025$$
$$\times102.5$$
Q6.
An amount increased by $$20$$% then increased by $$10$$% will experience an overall increase of %
Correct Answer: 32, 32%

Exit quiz

Download exit quiz

6 Questions

Q1.
$$£250+(0.02\times250)+(0.02\times250)+(0.02\times250)$$ is an example of a __________ interest calculation.
Correct answer: simple
compound
Q2.
$$£250\times1.02^3$$ is an example of a __________ interest calculation.
simple
Correct answer: compound
Q3.
$$£400$$ is invested at a rate of $$4.2$$% interest for $$5$$ years. What multiplier would we use in a compound interest calculation?
$$4.2$$
$$1.42$$
$$104.2$$
Correct answer: $$1.042$$
$$1.04$$
Q4.
$$£400$$ is invested at a rate of $$4.2$$% interest for $$5$$ years. The values at the end of each year will form __________ sequence.
an arithmetic
Correct answer: a geometric
a quadratic
a fibonacci
Q5.
$$£400$$ is invested at a rate of $$4.2$$% interest for $$5$$ years. What is the value of the investment at the end of the $$5$$ years? $$£$$
Correct Answer: 491.36, £491.36
Q6.
$$£500$$ is put into a savings account at a rate of $$4$$% compound interest p.a. After how many years will the investment reach $$£1000$$?
Correct Answer: 18, 18 years, Eighteen, Eighteen years