© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 1 Chapter 8 LESSON 8.4 Simple and Compound Interest Objectives: By the end of class, students will be able to:  Describe how to calculate simple and compound interest  Discuss the importance of compounding to a successful savings plan

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 2 Chapter 8 Simple Interest  Simple interest - Interest paid one time a year at the end of the year on the average balance in a savings account.

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 3 Chapter 8 Compound Interest  Compound interest is interest paid on the principal and on previously earned interest, assuming that the interest is left in the account.  Interest can be compounded in several ways.  Annually – every year  Semiannually – every six months  Quarterly – every three months  Monthly  Daily

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Banking and Interest & Questions of Interest In Class Activity  1. Please read and complete Banking and Interest supplemental handout.  Each student will be provided with a calculator to facilitate completion of handout questions.  2. Highlight any key terms in handout.  3. Complete questions 1-4 in handout.  4. Review questions 1-4 with Teacher. Slide 4 Chapter 8

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Student Practice/Application  1. Read pages in your Economics Textbook.  2. Complete Understanding Key Concepts questions 1-4 on page 277 of your Economics textbook.  3. Complete Think Critically questions 5-6 on page 277.  4. Begin working on Questions of Interest supplemental handout. ( To be completed as homework)  5. Complete Exit Ticket Question Slide 5 Chapter 8