| Compound
Interest by repeated use of Simple interest formula |
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I is the interest, P the principal, R the annual interest rate and
T the number of years |
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| This
problem presents the compounding interest on an investment of $500
for 3 years with interest of 6% calculated annually |
| i.e.
6% per annum interest = 6 /
100 = 0.06 |
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| Principle |
Rate |
Time in years |
Interest
after 1 year |
Total after
1 year |
Interest
for second year |
Total after
2 years |
Interest
in third year |
Total after
three years |
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formula =A12+B12*C12 |
formula
=A12+D12 |
formula
= E12*B12*C12 |
formula
=E12+F12 |
formula
=G12*B12*C12 |
formula
=G12+H12 |
| 500 |
0.06 |
1 |
30 |
530 |
31.8 |
561.8 |
33.708 |
595.508 |
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| Questions |
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| 1.
How much interest is earnt in the first year? |
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| 2.
How much interest is earnt in the second year? |
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| 3
How much interest is earnt in the thrid year? |
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| 4.
Why do these amount differ from year to year even thouth the interest
rate is constant at 6%? |
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| 5. If
this was a simple interest rate (a flat rate of interest) how much
inerest would it earn in year 1, 2 and 3? |
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| Activities |
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| 5.
Try different principal investments to see the changes in other values. |
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| 6. Try different rates of interest and observe
the changes in other values. Note:
do not save your changes when you close this file |
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