1. Earning Interest
“Interesting Information about Earning Interest”

2. In This Lesson:
Understand the difference between simple and compound interest.
Practice calculating both simple and compound interest.
Understand the difference between simple and compound interest
Practice calculating both simple and compound interest

3. 8th Wonder of the World

4. Would You Rather…
…get a penny doubled every day for 30 days, or $10,000 every day?
Penny
$10,000
Penny
$10,000
Day 1
Day 16
$.01
$10,000
$327.68
$160,000
Day 2
$.02
$20,000
Day 17
$655.36
$170,000
Day 3
$.04
$30,000
Day 18
$1,311
$180,000
Day 4
$.08
$40,000
Day 19
$2,621
$190,000
Day 5
$.16
$50,000
Day 20
$5,242
$200,000
Day 6
$.32
$60,000
Day 21
$10,485
$210,000
Day 7
$.64
$70,000
Day 22
$20,971
$220,000
Day 8
$1.28
$80,000
Day 23
$41,943
$230,000
Day 9
$2.56
$90,000
Day 24
$83,886
$240,000
Day 10
$5.12
$100,000
Day 25
$167,772
$250,000
Day 11
$10.24
$110,000
Day 26
$335,544
$260,000
Day 12
$20.48
$120,000
Day 27
$671,088
$270,000
Day 13
$40.96
$130,000
Day 28
$1,342,177
$280,000
Day 14
$81.92
$140,000
Day 29
$2,684,354
$290,000
Day 15
$163.84
$150,000
Day 30
$5,368,709
$300,000

5. Some Interest-ing Definitions
Interest- the money you earn from a bank or credit union.
Simple Interest- the extra money that you earn that is paid out in cash.
Interest Rate the extra money you earn expressed as a percentage.
Compound Interest the extra money that you earn from your bank or credit union when you leave all the money in your account.
Principal the money that you put in (or deposit) to your account.

6. Compound Interest
Compound interest- is earning interest on interest. Water and Rocks Activity:
Compound interest is earning interest on interest.
This sand activity will illustrate earning interest on interest.- Get colored sand. The interest represents the colored sand. The plain sand is the principle.
Pour in Regular Sand. Pour in a small amount of colored sand. This is the interest we earn in one month. For the second month we will add our plain sand to show we earn money on the principle + interest. Now add more colored sand- (more than previous). Then repeat. For 6 months.
What would this look like if we had been illustrating simple interest and wit drawled the interest we earned every month.??- No colored sand and less full.
Compound Interest
Simple Interest

7. Another View of Simple and Compound Interest
$1000 deposited and left alone for 30 years at 5% interest. The Blue line represents monthly compound interest, the pink line represents simple interest.

8. SIMPLE INTEREST
Charlie is trying to save for 6 months to buy a new iPod that costs $110. He is going to deposit $10 every month into his credit union account, which will pay him 20% interest on what he deposits. He will withdraw the interest each month to pay for fun things that he likes to do with his friends—going to movies, renting video games, and eating pizza.
$1000( )^3=

9. B. Beginning balance for this month C. Money Charlie Deposits
A: Deposit Cycle
B. Beginning balance for this month
C. Money Charlie Deposits
D. New Balance (B)+(C)
E. Interest Rate
F. Interest earned and paid out (D)x(E)
G. Month Ending Balance Same as (D) 1 10
20% 2 20 4 3 30 6 40 8 5 50 60 12
Total 42

10. Activity #2 Saving for an iPhone
Jessica is saving for a IPhone that costs $110. She is going to invest $10 every month for 6 months at her local credit union at 20%. Since she is not withdrawing the interest she will earn money on her interest.
Look at the header for hints.

11. Deposit Cycle
Beginning Balance for this month G
Money Jessica Deposits
New Balance
B+C
Rate of Interest
Interest Earned and left in account DxE
Ending Balance
(D) + (F) 1
$10 10
20% 2 12 22
4.40
26.40 3
36.40
7.28
43.68 4
53.68
10.74
64.42 5
74.42
14.88
89.30 6
99.30
19.86
119.16
Total
59.16
Add this to the flip cart so students can come up and write this down.
Cover line 1 together and line 2 if you can.

12. What You’ve Learned:
Understand the difference between simple and compound interest.
Practice calculating both simple and compound interest.