F1.4 Determine the growth of simple and compound interest at various rates using digital tools, and explain the impact interest has on long-term financial planning.
Activity 1: Determine the Increasing Value of Simple and Compound Interest
Offer the following situation to students:
Laurent wants to borrow $1000 for a period of 10 years and is given two options.
|
Financial Institution |
Duration |
Interests |
|
DEF |
5 years |
3% simple interest |
|
MNO |
5 years |
2% compound interest |
Have students determine the increasing value of the two options using a digital tool.
Ask students the following questions:
- What is the difference between borrowing with simple interest versus compound interest?
- Which option is more cost effective for Laurent? How do you know?
Activity 2: Explain the Impact of Interest in Long-Term Financial Planning
Show students the graph below.
Source: translated from En avant, les maths!, 8e année, CM, Littératie financière, p. 5
Ask students the following questions:
- Which of the two institutions do you think offers a simple interest rate? a compound interest rate? Justify your reasoning.
- Which of the following options earns the most interest given that you would like to invest $500 for a 10-year period? Explain your reasoning.