 Open the envelope on your desk  Is anyone a millionaire? Are you a millionaire?

Starter: Investing your Money  Four banks have accounts for ‘would be millionaires’  For a specific investment amount, they have interest rates that guarantee you will be a millionaire in just one year C New Savings Accounts BankInvestmentInterest Rate pa Natwest£ % Barclays£ % HSBC£ % Co-operative£ % What amount would you have to have started with for this to have worked? % increase over 1 year  How much money would you have after a year? Note: You must only round to the nearest pence

Eeekkk! Seems the banks got it wrong  A review by the Year 10 Maths Authority has highlighted an error with the ‘would be millionaire’ accounts – they don’t make you a millionaire Z BankInvestmentInterest Rate paAfter 1 Year Natwest£ %£ Barclays£ %£ HSBC£ %£ Co-operative£ %£  The banks’ money men say it was a typo in the offer, they actually guarantee you will be a millionaire after 2 years  Work out how much interest you made in the first year, then add this to your 1 year total  Are you a millionaire yet? What about after 3 years? Note: You must only round to the nearest pence

Hmmm it’s still not working!!  The Year 10 Maths Authority are up in arms, these accounts are still not making them actual millionaires Z BankInvestmentInterest Rate paAfter 2 Years Natwest£ %£ Barclays£ %£ HSBC£ %£ Co-operative£ %£  Now the bank’s money men are saying your calculations are wrong, its based on compound interest, not simple interest  In pairs, discuss what compound interest could be and how it might be calculated?

Compound Interest Jack puts £500 into a savings account with an annual interest rate of 5% - how much will he have after 4 years if he doesn’t add or withdraw any money? At the end of year 1 Jack has £500 × 1.05 = £525 At the end of year 2 Jack has £525 × 1.05 = £ At the end of year 3 Jack has £ × 1.05 = £ At the end of year 4 Jack has £ × 1.05 = £ We can write this in a single calculation as: £500 × 1.05 × 1.05 × 1.05 × 1.05 = £ Or using index notation as: £500 × = £607.75

Compound Interest – making you a millionaire!  Calculate the compound interest on your investment over two years  Hopefully you are now a millionaire!