Compound Interest
Chapter Name : Comparing Quantities |
Sub Topic Code : 104_08_08_06_01 |
Topic Name : Compound Interest |
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Sub Topic Name : Compound Interest |
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Introduction
What is interest? What is compound interest?
Pre-Requisites:
Basic knowledge about ratios and percentages, profit and loss
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.
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.