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Year 10
Higher

Simple and compound interest

I can appreciate the difference between simple interest and compound interest.

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New
New
Year 10
Higher

Simple and compound interest

I can appreciate the difference between simple interest and compound interest.

Download all resources
Share activities with pupils

Lesson details

Key learning points

  1. Repeated percentage change occurs in real-life.
  2. Simple interest is calculated once and then added repeatedly.
  3. Compound interest is recalculated at each stage.
  4. By considering the calculations for compound interest, you can be more efficient.
  5. Calculators can simplify this process even further.

Common misconception

Pupils should pay careful attention to what the question asks. Working out the overall amount after a simple or compound increase is different to working out the total interest only.

Pupils can underline or highlight the key instruction to the question e.g. Total amount or total interest, to remind them of the need to subtract from the original amount or not.

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 the interest calculated on the original amount and the interest accumulated over the previous period.

This lesson is focussed around knowing the differenced between simple and compound interest as opposed to calculating. Have a discussion where have they seen interest rates advertised, published, etc. Have they thought what it means? Do they have bank account and do they know their interest rates?
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).

Video

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Starter quiz

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6 Questions

Q1.
If a number increases by 0.2% and is now 1252.5, what was it originally?
Correct Answer: 1250
Q2.
If a number decreases by 64% and is now 54, what was it originally?
Correct Answer: 150
Q3.
Write 90 as a percentage of 1800
Correct Answer: 5%, 5
Q4.
Find 60% of 70
Correct Answer: 42
Q5.
Which statement is the equivalent of "Decrease 90 by 20%"?
Work out 20% of 90
Correct answer: Work out 80% of 90
Divide 90 by 20
Q6.
If a number decreases by 40% and is now 54, what was it originally?
Correct Answer: 90

Exit quiz

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6 Questions

Q1.
If you invest £300 for three years and receive 2% simple interest each year, how much will you have at the end?
Correct Answer: 318, £318
Q2.
If you invest £500 for three years and receive 3% simple interest each year, how much will you have at the end?
Correct Answer: 545, £545
Q3.
If you invest £1200 for five years and receive 2.5% simple interest each year, how much will you have at the end?
Correct Answer: 1350, £1350
Q4.
If you invest £300 for three years and receive 2% compound interest each year, how much will you have at the end (to 2 d.p.)?
Correct Answer: 318.36, £318.36
Q5.
If you invest £500 for three years and receive 2.5% compound interest each year, how much will you have at the end (to 2 d.p.)?
Correct Answer: 538.45, £538.45
Q6.
If I started with £58 and have £61.48 after 3 years in savings with an interest rate of 2%, was the interest simple or compound?
Correct answer: simple
compound