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Deducing A Formula For Compound Interest
Chapter Name : Comparing Quantities
Sub Topic Code : 104_08_08_07_01
Topic Name : Deducing A Formula For Compound Interest
Sub Topic Name : Deducing A Formula For Compound Interest
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 runs 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.

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