Simple and Compound Interest
Ages 16–18Difficulty adapts to you
Simple and Compound Interest
Simple interest is calculated on the original principal each period: I = PRT, where R is written as a decimal. Compound interest is calculated on the growing balance: A = P(1 + r)^n. State the time unit and interest rate clearly before substituting.
Your goals
- ✓You can compare flat interest with interest that is added to the balance.
- ✓You can use Simple and Compound Interest, model correctly.
- ✓You can use the definitions, units, assumptions, and examples to check your answer.
Words to know
- Simple and Compound Interest:
- Compare flat interest with interest that is added to the balance.
- model:
- A rule or representation used to describe a situation and make a prediction.
Examples
- 1At 10% simple interest for 2 years on ₦100,000, I = 100,000 × 0.10 × 2 = ₦20,000.
- 2At 10% compound interest for 2 years, A = 100,000 × 1.1² = ₦121,000, so the interest is ₦21,000.
Check these
- • Do not skip the meaning of a term or give a result without explaining what it means.
- • Keep every number, symbol, label, and unit in its correct place.
- • Show enough working to check how you reached your answer.
Helpful habits
- • Read the whole question before choosing what to do.
- • Show one clear step at a time and check each step.
- • If you are stuck, draw a model, try smaller numbers, or revisit the example.
Now try your own
Create your own simple and compound interest example, solve it, and explain how you checked it.
Spark
Creativity & Innovation“Challenge yourself: can you explain this to a friend?”