Simple vs. Compound Interest

ObjectiveTo teach kids the difference between simple and compound interest and to show them how to calculate interest.
Description Interest

When you borrow money they are charged interest and when you lend money or invest money you are paid interest. There are different types of interest do the following activity to discover the difference between simple and compound interest.

Simple interest:

Simple interest is calculated only on the principal amount or the portion of the principal which remains unpaid.

You calculate simple interest using the following formula: Interest = Principal x Interest Rate x The Number of Time Periods the interest is applied (I=PRT)

Compound Interest:

Compound interest is paid on the original principle and on the accumulated past interest.

The formula for calculating compound interest varies depending upon whether the loan will be paid over a number of years or whether the interest is applied in more frequent intervals. Here is some information on the formula for compound interest.

Calculate interest Worksheets and Calculators:

Here are some worksheets and calculators to help you teach this to your kids:

 

 

 

Complete When

Mark this activity as complete when you have a good understanding of simple and compound interest and you have completed one simple interest worksheet and one compound interest worksheet.

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Age Range 10    11    12    13    14    15    16    17    18   
Activity Type Lesson
Tags Logical-Mathematical Intelligence  Linguistic Intelligence  Interest 
CreatedCindyCindy
Last ModifiedRobRob

References

Reference Reference Note  
Wikipedia Here is a Wikipedia post about interest .
Frugal Living Here is some information about simple inte rest and compound interest .

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