Application Of Compound Interest Formula
Chapter Name : Comparing Quantities |
Sub Topic Code : 104_08_08_09_01 |
Topic Name : Application Of Compound Interest Formula |
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Sub Topic Name : Application Of Compound Interest Formula |
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Introduction
What is interest? What is compound interest?
Pre-Requisites:
Basic knowledge about ratios and percentages, profit and loss, interest
Activity:
The percentage of number of marbles depends on the number of them present at that particular time rather than the initial time.
Real Life Question:
How much interest does the bank charge for an education loan?
Key Words / FlashCards
| Key Words | Definitions (pref. in our own words) |
|---|---|
| Compound Interest | Interest calculated on principal amount formed by the loan and the previous interest is called compound interest |
Learning aids / Gadgets
| Gadgets | How it can be used |
|---|---|
| Marbles and urns | Take an urn and place some marbles in it. Ask the student to increase the number of marbles by 5% of the number of marbles already present and then reduce the number of marbles by 3% for every 5 minutes. |
Real life uses :
Banking, stock market investments
Practical examples around us
| Examples | Explainations |
|---|---|
| Money lending shops | Some money lenders lend money on compound interest policy. |
What you learn in Theory:
Compound interest is more than the simple interest on a particular sum of money. Compound interest is collected on the principal sum and the interest accumulated till date. Interest can also be calculated for any time interval.
What you learn in Practice:
After the first five minutes 5% of the initial number of marbles N is increased. The total now is 1.05N. Then 3% of 1.05N should be reduced and not 3% of N. So the second activity needs to consider the additional marbles to the initial marbles.