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Year 10
Higher

Changing compound interest rates

I can carry out compound interest calculations where the percentage changes.

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New
New
Year 10
Higher

Changing compound interest rates

I can carry out compound interest calculations where the percentage changes.

Download all resources
Share activities with pupils

Lesson details

Key learning points

  1. By considering the calculations for compound interest, you can be more efficient.
  2. Through understanding the structure, you can adapt to changing percentages.
  3. Part of that structure is understanding the period of time for each interest rate.
  4. Part of that structure is understanding finding a percentage of a percentage.

Common misconception

Assuming that an increase of 10% followed by a decrease of 10% takes you back to 100%, etc.

Provide plenty of examples to illustrate the structure of what happens. If you increase a number by a percentage the number will increase meaning that you will be finding 10% of a larger number and hence decrease by more.

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.

Pupils could research the purchase price of their 'dream car' and using the depreciation figures from the lesson work out how much of its value it loses a year for a given number of years.
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).

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Starter quiz

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6 Questions

Q1.
What is the correct multiplier for compound interest over 5 years at 1.6%?
$$1.16^5$$
Correct answer: $$1.016^5$$
$$1.005^6$$
Q2.
If I decrease £90 to £18, what is the percentage loss?
Correct Answer: 80%, 80, -80%
Q3.
What is the correct multiplier for compound interest over 9 years at 2.5%?
$$1.25^9$$
$$1.025 \times 9$$
Correct answer: $$1.025^9$$
Q4.
Increase 500 by 4.9%.
Correct Answer: 524.5
Q5.
The value of a good investment gains value by 6% compound interest each year. If the investment was worth £30 000 when purchased how much is it worth after 3 years?
Correct Answer: 35730.48, £35730.48, £35 730.48, 35 730.48
Q6.
If I increase £90 to £135, what is the percentage gain?
Correct Answer: 50, 50%, +50%

Exit quiz

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6 Questions

Q1.
If I put £9000 in an account and it earns 5% compound interest for the first two years, then 4% for the third year, how much money will be in the account at the end of that year?
Correct Answer: 10319.40, £10 319.40, £10319.40, 10 319.40
Q2.
If I put £50 000 in an account and it earns 5% compound interest for the first two years, then 4% for the third year, how much money will be in the account at the end of that year?
Correct Answer: 57330, £57330
Q3.
If I put £13 000 in an account and it earns 7% compound interest for the first year, then 2% for the second year, how much money will be in the account at the end of that year?
Correct Answer: 14188.20, £14188.20
Q4.
If I put £2500 in an account and it earns 4% compound interest for the first two years, then 7% for the next five years, how much money will be in the account at the end of that period?
Correct Answer: 3792.50, £3792.50
Q5.
If I put £2500 in an account and it earns 7% compound interest for the first year, then 2% for the second year, how much money will be in the account at the end of that year?
Correct Answer: 2728.50, £2728.50, £2 728.50, 2 728.50
Q6.
If I put £4800 in an account and it earns 5% compound interest for the first two years, then 3% for the third year, how much money will be in the account at the end of that year?
Correct Answer: 5450.76, £5450.76, £5 450.76, 5 450.76