# Finance and Growth Grade 10: Simple and Compound Interest

Introduction

Greeting and introduction

Good Morning and welcome our Mathematics class for today.

Today's topic is all about money, Finance and Growth, we will be looking at simple and compound interest.

Money and finance are part of the world. For example, you may want to invest your money (pocket money), and earn interest or you may want to borrow money from someone or even from the bank, who will charge you interest on the amount borrowed. If you borrow money from a bank, than you can expect to pay interest on the loan. Interest is charged at a percentage of the money owed over the period of time it takes to pay back the loan. This means the longer the loan exists, the more interest will have to be paid on it.

The two type of interest are shown:

Simple Interest

Simple interest is interest calculated only on the initial amount that you invested.

The general formula for calculating simple interest is:

A = P(1 + in)

Where: A = accumulated amount (final)

P = Principal amount (initial)

i = interest written as decimal

n = number of years

The simple interest formula is used to find pieces of missing information.

Compound Interest

Compound interest allows interest to be earned on interest. While simple interest, only the original investment earns interest, but with compound interest, the original investment and the interest earned on it. Therefore compound interest is the interest earned on the principal amount and on its accumulated interest.

The general formula for calculating compound interest is:

A = P(1 + i)n

Where: A = accumulated amount (final)

P = Principal amount (initial)

i = interest written as decimal

n = number of years

NB: After this lesson you will be able to apply the information given to determine the unknown by using either the simple interest formula or the compound interest formula.

Use the link below for more details on when and how to use the simple interest and compound interest formula.

Click on the links below and watch the videos to assist you in completing the task on simple and compound interest.

Questions

1. A man invests R4000 at 4,5% compound interest per year. What would the investment be worth after 6 years.
2. Four years ago, Thandi invested some money at 8,5 % p.a. simple interest. Today, she has just received a final return of R15000 from the bank. How much did Thandi initially invest?
3. Adrian invested an amount of money 10 years ago.. The interest rate remained constant at 6% p.a., compounded annually. What amount did he invest if the investment is now worth R150000?
4. If you borrow R8000 for 3 years at 10% interest compounded annually, what is the total amount at the end of each year.
5. An investment of  R15000 grows to R20000 in 4 years. If interest is compounded annually. What is the interest rate per year?
Process
1. Read the introduction to see formuals for simple and compound interest.
2. Watch all the videos to answer the above questions
4. Use the link to the textbook to gather extra information.

Evaluation
 Questions Variable mark Formula mark Total 1 1 1 2 2 1 3 4 3 1 3 4 4 1 3 4 5 2 4 6 20

Total Mark: 20 Marks

Conclusion

In this lesson it was proven when to use the simple interest formula and what to use the compound interest formula.

We applied both formula to calculate interest.

We can identify situation where the formulas can be used.

We will continue with simple and compound interest in our next session, but Inflation and population growth will be introduced.

Watch the video below in preparation for the next session.

Credits